Budget 2026 incentivizes company car drivers towards Electrics
If you’re managing a company car fleet, you’re already navigating a system where Benefit-in-Kind (BIK) tax is determined by a trio of factors: the car’s Original Market Value (OMV), annual business mileage, and its CO2 emissions. Since January 2023, this has been the rulebook. Now, Budget 2026 is revising that rulebook to incentivise a shift to electric fleet. Let’s break down what’s new and what it means for your business.
What’s changing in 2026 BIK? The Key details
Starting this year, electric vehicles will be assigned their own dedicated classification: Category A1. This places them in the lowest possible emissions band, which means they will benefit from the most favourable starting point for Benefit-in-Kind (BIK) tax rates right from the outset. The popular Original Market Value (OMV) relief is not being removed, but it will be gradually tapered down. We are transitioning from the current flat-rate reduction to a phased step-down. From 2023 to 2025, the EV relief was at a substantial €35,000. This reduces to a still significant €20,000 in 2026, before a further decrease to €10,000 in 2027.
Implication for your drivers (and your budget)
*Figure 1: 2026 Benefit-in-Kind (BIK) Tax Comparison: ICE vs. BEV.
Despite the same starting price, the BEV benefits from the €20,000 OMV relief in 2026. When combined with its 0g/km CO2 rating placing it in the lowest tax category, the annual BIK cash equivalent for the BEV is just €2,274, compared to €9,348 for the ICE vehicle. This represents a dramatic reduction in taxable benefit and, consequently, income tax and USC for the employee.
While BIK rates for company car drivers are changing for 2026, the commercial vehicle rates will remain at 8%.
The Home Charger Exemption
Under measures introduced in the Finance Act 2024, there is an exemption from BIK for the installation of a BEV home charger by an employer at an employee’s private residence. This is provided the employer-provided vehicle is a pure electric vehicle (not a hybrid), making the transition to electric even more seamless and cost-effective for the driver.
We’ve built a simple calculator to model these 2026 changes for your specific fleet. You can test different vehicles, mileages, and scenarios in minutes. Just reach out to our staff for a complimentary copy and a chat about your EV transition strategy.
(Please note: Mahony Fleet BIK calculator is only an estimation tool. For exact BIK figures, please consult Revenue or your company accountant.)
For more insights on BIK and its impact on your business, visit:
