Peter Burke
Question:260. Deputy Peter Burke asked the Minister for Finance if he has plans to extend benefit-in-kind taxation from January 2025; and if he will make a statement on the matter. [12783/24]
View answerWednesday, 20 March 2024
Questions (260)
Written answers
I am answering this question in reference to the temporary changes to vehicle BIK provided in sections 7 and 8 in Finance Act (No. 2) 2023.
The Government remains committed to the environmental rationale behind the current emissions-based vehicle benefit-in-kind (BIK) regime, which has been in operation since 1 January 2023. Since this date, the amount taxable as BIK continues to be determined by the car’s Original Market Value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands determine whether a standard, discounted, or surcharged rate is taxable. Battery Electric vehicles (BEVs) benefit from a preferential rate of BIK, ranging from 9-22.5% depending on mileage, while fossil-fuel vehicles are subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars.
However, as the new emissions-based regime resulted in significant BIK increases for many high mileage and/or above average emission vehicles, given the broader inflationary context, temporary changes to BIK were introduced as part of Finance Act 2023. This temporary change comprised of a universal relief of €10,000 being applied to the OMV of vehicles in Category A-D, in order to reduce the amount of BIK payable. Additionally, the lower mileage limit in the highest mileage band was reduced by 4,000 km, so that the highest mileage band is entered into at 48,001 km.
The BIK relief was introduced as a temporary measure, which remained in place until 31 December 2023. An extension of this measure was announced as part of a cost of living package in Budget 2024. The measure is due to expire on 31 December 2024 and there are currently no plans to extend the €10,000 deduction.
In addition to the favourable treatment for low emission vehicles in the new BIK structure, Budget 2024 also extended the EV tapering mechanism applied to BIK relief for electric vehicles of €35,000 to end 2025, with reductions of €20,000 in 2026 and €10,000 in 2027. This measure forms part of a broader series of generous tax related measures for BEVs, including a reduced rate of 7% VRT, a VRT relief (to end 2025), low motor tax of €120 per annum, and 0% BIK on electric charging.