Private use of employer provided vehicles
How to calculate the taxable benefit
You will need to calculate the ‘cash equivalent’ of your employee’s private use of the employer provided car. This is the amount that you will add to your employee's pay.
The cash equivalent can be reduced by any contribution your employee makes directly to you towards the running cost of the car.
For the years up to 2022, the cash equivalent was a percentage of the Original Market Value of the car. The percentage was based on the amount of mileage for business purposes.
From 1 January 2023, a CO2 emissions based benefit in kind (BIK) regime for employer provided cars applies. The amount taxable as BIK is determined by:
- the car’s Original Market Value
- the annual business kilometres driven
- and
- the CO2 emissions based bands.
From 1 January 2023, the lower limit in the highest mileage band is reduced by 4,000 km to 48,001 km. With effect from 1 January 2026, this reduction has been made permanent.
From 1 January 2026, an additional vehicle category A1 for zero CO2 emission cars is introduced. For details of all BIK rates, please see Table A below.
For 2023, 2024, 2025 and 2026, a reduction of €10,000 can be applied to the Original Market Value of cars in categories A1, A, B, C and D. The reduction is not applicable to cars in Category E.
This reduction to the vehicle's Original Market Value will continue to apply on a tapered basis for the following years of assessment:
- 2027 - reduction of €5,000.
- 2028 - reduction of €2,500.
The reduction to the Original Market Value is in addition to the relief for electric vehicles. For further information, please see the page entitled 'Exemptions and reductions' in this section.
Calculating the Original Market Value
The Original Market Value is the cost of the car in Ireland prior to its first registration, including all Irish taxes and duties. Generally, this is the list price of the vehicle at the time of first registration including:
The Original Market Value is to be used, even if you purchased the car second-hand.
- Example 1
You purchase, or lease, a second-hand car originally worth €25,000. VRT and VAT are included in the €25,000 value.
The Original Market Value for the calculation of the taxable benefit is the cost of €25,000.
Original Market Value of imported cars
If you imported the car, any foreign taxes and duties applicable should be ignored.
- Example 2
You import a car from abroad on 1 November which was first registered in a foreign country on 1 July. The car was worth €27,000 in the foreign country on 1 July (inclusive of all foreign taxes and duties).
In Ireland on 1 July, the car was worth €25,000 (inclusive of all Irish taxes and duties). It was worth €20,000 in Ireland on 1 November (inclusive of all Irish taxes and duties).
The Original Market Value is €25,000.
Effect of a purchase discount on the Original Market Value
If you received a discount when you purchased the vehicle, you may reduce the Original Market Value to reflect the discount received. The maximum discount is usually the amount an ordinary customer would receive when buying one car in a dealership. This amount typically does not exceed 10%.
Higher discounts may be available where you can prove they would have been available to an ordinary retail customer. In cases of doubt, you can agree in advance the level of discount with your Revenue office.
- Example 3
You purchase a fleet of vehicles costing €25,000 each (VRT and VAT included). You are given a 15% discount.
Discounts on single retail sales of these vehicles generally do not exceed 10%.
The Original Market Value is calculated as €25,000 @ 90% = €22,500.
How to calculate the cash equivalent
For 2023, 2024, 2025 and 2026, to calculate the cash equivalent use of an employer provided car in categories A1, A, B, C and D, you:
- deduct €10,000 from the Original Market Value
- and
- multiply by the applicable vehicle category percentage.
For the years up to 2022, please refer to Tax and Duty Manual part 05-01-01b.
To determine the applicable percentage, you need to:
- establish your vehicle's category based on the amount of CO2 g/km the vehicle produces from Table B below
- and
- compare the business mileage travelled for the year to determine the applicable percentage from Table A below.
Table B
| Vehicle category | CO2 emissions (CO2 g/km) |
|---|
|
A1
|
0g/km
|
|
A
|
More than 0g/km up to and including 59g/km
|
|
B
|
More than 59g/km up to and including 99g/km
|
|
C
|
More than 99g/km up to and including 139g/km
|
|
D
|
More than 139g/km up to and including 179g/km
|
|
E
|
More than 179g/km
|
Table A
| Business mileage | Vehicle categories |
|---|
|
lower limit (kilometres)
|
Upper limit (kilometres)
|
Vehicle category A1
|
Vehicle category A
|
Vehicle category B
|
Vehicle category C
|
Vehicle category D
|
Vehicle category E
|
|
0
|
26,000
|
15%
|
22.5%
|
26.25%
|
30%
|
33.75%
|
37.5%
|
|
26,001
|
39,000
|
12%
|
18%
|
21%
|
24%
|
27%
|
30%
|
|
39,001
|
48,000
|
9%
|
13.5%
|
15.75%
|
18%
|
20.25%
|
22.5%
|
|
48,001*
|
And above
|
6%
|
9%
|
10.5%
|
12%
|
13.5%
|
15%
|
*Applies to 2023 and subsequent years of assessment only. Prior to 2023, the lower limit in the highest mileage band was 52,001km.
You should review notional pay regularly (at least quarterly) to ensure that the payments reported to Revenue are as accurate as possible.
The cash equivalent can be reduced by any contribution your employee makes directly to you towards the running costs of the car.
- Example 4
Your employee has the use of an employer provided car with an Original Market Value of €30,000. The C02 emissions are 105g/km and annual business travel is 22,000 kilometres.
In 2025, your employee is not required to pay towards the cost of the car or its running expenses. Table B shows that this is a Category C car. Table A notes that the applicable percentage is 30%.
The cash equivalent (notional pay) is determined as €20,000 (€30,000 - €10,000) @ 30% = €6,000. Notional pay of €6,000 (€115.38 per week or €500 per month) should be added to their taxable wages or salary. You should calculate Income Tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) on the total amount.
- Example 5
In 2026, your employee has the use of an employer provided car with an Original Market Value of €50,000. The C02 emissions are 195g/km and annual business travel is 24,000 kilometres.
The employee is not required to pay towards the cost of the car or its running expenses. Table B shows that this is a category E vehicle. Table A notes that the applicable percentage is 37.5%.
The Original Market Value is €50,000. The cash equivalent (notional pay) is determined as €50,000 @ 37.5% = €18,750. There is no reduction of €10,000 in the Original Market Value for a Category E car.
Notional pay of €18,750 (€1,562.50 per month) should be added to their taxable wages or salary. You should calculate Income Tax, PRSI and USC on the total amount.
Your employee may not have documents proving business or private kilometres driven in a year. Where this happens, you may assume 8,000 km are private kilometres.
Employee contributions towards cost
Your employee may pay towards the running costs of the car. You can deduct the amount they pay from the cash equivalent. The reduction can only be applied if your employee pays the amount directly to you.
- Example 6
In 2026, your employee has the use of an employer provided electric car with an Original Market Value of €55,000 and annual business travel is 23,000 kilometres.
The CO2 emmissions are 0g/km. The vehicle is a Category A1 car so the applicable percentage is 15%.
Your employee is required to pay, directly to you, €50 per month for petrol for the car provided to them. The cash equivalent for the year would be reduced by €600 (€50 × 12). A Category A1 car will be entitled to the Original Market Value reduction of €10,000 for 2026. As this is an electric car, an additional reduction to the Original Market Value of €20,000 will apply for 2026.
Calculation of notional pay
| | Calculation | Value |
|---|
| Original Market Value (reduced) and applicable percentage (€55,000 - €30,000) |
€25,000 @ 15%
|
€3,750
|
|---|
| Annual contribution is deducted |
|
€600
|
|---|
| Notional pay |
|
€3,150
|
|---|
The reduction to the Original Market Value is in addition to the relief for electric vehicles. For further information, please see the 'Exemptions and reductions' page in this section.
Employee contribution to the purchase of the car
Your employee might make a lump sum contribution towards the purchase of an employer provided car. The amount contributed reduces the cash equivalent in the first year.
- Example 7
In 2026, you are willing to provide an employer provided car up to the value of €25,000 for your employee. They have a particular car in mind costing €29,000. They agree to pay the difference of €4,000 to you. The car is a Category C vehicle based on C02 emissions of 120g/km.
Your employee travels 19,000 business kilometres annually. They also pay €1,000 each year directly to you for the private use of the car.
Calculation of notional pay - Year 1
| | Calculation | Value |
|---|
Original Market Value (reduced) and applicable percentage (€29,000 - €10,000)
|
€19,000 @ 30%
|
€5,700
|
|---|
| Lump sum payment is deducted |
|
€4,000
|
|---|
| Annual contribution is deducted |
|
€1,000
|
|---|
| Notional pay |
|
€700
|
|---|
Calculation of notional pay - Year 2 (2027) and following years
| | Calculation | Value |
|---|
| Original Market Value (reduced) and applicable percentage (€29,000 - €5,000) |
€24,000 @ 30%
|
€7,200
|
|---|
| Annual contribution is deducted |
|
€1,000
|
|---|
| Notional pay |
|
€6,200
|
|---|
Next: Employees with low business kilometres