Pay and benefits
Company car benefit in kind (the tax on the perk): how it is worked out in 2026
Last updated 16 October 2026
Tax on a company car is a share of its list price, set by CO2 and business kilometres. In 2026, €10,000 comes off the price first, more for electric cars.
If your employer gives you a car you can use privately, the private use is a benefit in kind (a taxed perk). A yearly ‘cash equivalent’ is added to your pay and taxed through payroll, though you never receive it as cash.
Step 1: the car's value
Start from the Original Market Value (OMV). That is the Irish list price including VAT and Vehicle Registration Tax when the car was first registered. It applies even if your employer bought it second-hand. It can be cut by the discount an ordinary buyer would get, usually up to 10%. Then, for 2026, take off €10,000 for cars in categories A1 (zero emission) to D, and a further €20,000 for a fully electric car.
Step 2: the percentage
The percentage depends on the car's CO2 category and your business kilometres for the year:
| Category | CO2 | 0 to 26,000 km | 26,001 to 39,000 km | 39,001 to 48,000 km | 48,001 km and over |
|---|---|---|---|---|---|
| A1 | 0 g/km (from 2026) | 15% | 12% | 9% | 6% |
| A | 1 to 59 g/km | 22.5% | 18% | 13.5% | 9% |
| B | 60 to 99 g/km | 26.25% | 21% | 15.75% | 10.5% |
| C | 100 to 139 g/km | 30% | 24% | 18% | 12% |
| D | 140 to 179 g/km | 33.75% | 27% | 20.25% | 13.5% |
| E | 180 g/km or more | 37.5% | 30% | 22.5% | 15% |
An example
Take a petrol car with an OMV of €45,000 and CO2 of 120 g/km (category C). It is driven 20,000 business kilometres in 2026 by an employee earning €70,000:
| Original Market Value | €45,000.00 |
| Less 2026 reduction | (€10,000.00) |
| Value charged | €35,000.00 |
| Cash equivalent at 30% | €10,500.00 |
| Extra tax a year | €5,482.66 |
An electric car with the same OMV has a cash equivalent of €2,250.00 in 2026, costing €1,173.22 in tax. In 2027 the reductions fall to €5,000 and €10,000, so the same electric car's cash equivalent rises to €4,500.00.
Ways the charge comes down
- Paying your employer towards running costs reduces the cash equivalent euro for euro: paying €1,500 cuts the example to €9,000.00. A lump sum towards buying the car counts in the first year.
- Low business mileage relief: 20% off if you drive between 8,000 and 24,000 business km and work at least 20 hours a week. You must also spend 70% of your time away from your base and keep a logbook.
- Part of the year: the charge is reduced for days the car wasn't available to you.
To work out your own car's benefit and the tax it costs you, use the company car tax calculator. Choosing between a car and a cash allowance? See cash or company car.
Work it out
Sources
- Revenue: Private use of employer provided vehicles: how to calculate the taxable benefit (checked 25/10/2026)
- Revenue: Private use of employer provided vehicles: exemptions and reductions (checked 25/10/2026)
- Revenue: Employees with low business kilometres (checked 25/10/2026)
- Revenue: Employer provided vehicles not available for the full year (checked 16/10/2026)
- Revenue: Tax and Duty Manual Part 05-01-01b: Benefit in kind on the provision of vehicles (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.