Benefits in Kind (BIK) Ireland Guide 2026

Employer guide to company cars, vans, health insurance, Small Benefit Exemption and payroll reporting

A Benefit in Kind, or BIK, is a non-cash benefit with a monetary value that you provide to an employee or director. Revenue treats most BIK as taxable income, so you normally process the taxable value through payroll as notional pay and calculate Income Tax, PRSI and USC on it.

Company cars are the obvious example, but BIK reaches much further. Health insurance, preferential loans, accommodation, private use of company assets and some staff rewards can all create a payroll tax charge. The calculation is not the same for every benefit, which is why the first job is always to identify the benefit correctly and use the right valuation rule.

For 2026, employers also need to keep taxable BIK separate from Enhanced Reporting Requirements (ERR). Taxable benefits go through payroll. Certain tax-free payments and benefits, including the Small Benefit Exemption, qualifying travel and subsistence and the remote working daily allowance, are reported separately under ERR.

How BIK works through payroll

The starting point is simple. If an employee receives a taxable benefit, you add its taxable value to pay as notional pay. Income Tax, PRSI and USC are then calculated on cash pay plus the benefit value. Employer PRSI is also due where the normal rules require it.

The €1,905 threshold is an income threshold, not a €1,905 tax-free BIK allowance. If the employee’s total income, including benefits, is more than €1,905 for the year, taxable benefits fall within the BIK rules. Company directors are taxable on BIK regardless of their total income.

The rule also reaches benefits provided for people connected with the employee. If you provide a benefit to an employee’s spouse or civil partner, family member, dependant or guest, the employee can be taxable on that benefit. Do not assume that routing the benefit to someone else takes it outside payroll.

For the €1,905 test, income from a previous job is not counted. If the employee works for several businesses under the same parent company, however, Revenue measures the combined income from those employments against the threshold. This is a small rule, but it can matter for low-paid or short-term employees.

When should you report the benefit?

Include notional pay in the payroll period in which the benefit is provided. If the employee has no actual pay in that period, the employer can account for the tax by the earlier of the next pay period or 31 December in the tax year.

Some benefits are naturally spread over the period they are available. Revenue allows the annual value of company cars, vans, preferential loans and accommodation to be spread across the relevant pay periods. Review the figures during the year so the payroll value remains realistic.

A high-value benefit can create another practical problem: the employee may not have enough cash pay in that period to cover the tax. If wages are insufficient, the employer still has to pay the full tax due to Revenue and should arrange for the employee to repay the amount paid on their behalf. If it remains unpaid, a further taxable benefit can arise.

This is why benefit design and payroll timing should be considered together. A benefit can look straightforward when it is approved by HR, but the payroll outcome can be uncomfortable if a large annual charge lands against a small cash payment.

Taxable BIK and ERR are different reporting streamsTaxable BIK is processed through payroll. ERR is used for specified tax-free payments and benefits. Do not put a tax-free ERR item into payroll as notional pay simply because it has to be reported to Revenue.

Once the taxable value is calculated, it still has to reach Revenue in the right payroll period. For the RPN, PSR and on-or-before-pay-date workflow, see our PAYE Modernisation Ireland guide.

Company car BIK 

Company car BIK depends on three things: the car’s Original Market Value (OMV), annual business kilometres and its CO2 category. Revenue’s 2026 company-car tables include the new Category A1 for zero-emission cars.

Commuting is generally private use. If a car is available for private use, BIK can arise even where the employee says they rarely use it outside work. Availability matters.

Original Market Value

OMV is generally the Irish list price of the car when it was first registered, including VAT and VRT. Use that original value even if the employer later buys the car second-hand.

• Second-hand car: use the original market value when new, not the employer’s purchase price.
• Imported car: establish the comparable Irish value at first registration.
• Fleet discount: a normal retail discount can reduce OMV. If a discount is unusually high, keep evidence that an ordinary retail buyer could have obtained it.

CO2 categories and BIK percentages

Revenue’s 2026 table uses 48,001km as the lower limit for the highest business-mileage band. That lower limit now applies on an ongoing basis.

OMV reductions in 2026

• Categories A1, A, B, C and D: deduct €10,000 from OMV before applying the BIK percentage.
• Category E: no €10,000 general OMV reduction.
• Zero-emission electric cars: deduct a further €20,000 in 2026. This sits on top of the €10,000 general reduction for Category A1.

The reliefs taper after 2026, which matters if you are choosing vehicles for a multi-year company fleet. The general OMV reduction falls to €5,000 in 2027 and €2,500 in 2028. The separate electric-car reduction falls from €20,000 in 2026 to €10,000 in 2027 and then ends. A car that looks attractive on 2026 BIK figures can therefore produce a higher taxable value in later years.

Electric car exampleA zero-emission car with an OMV of €55,000 and 23,000 business kilometres falls into Category A1 at 15%. The 2026 OMV reductions total €30,000, leaving €25,000. The cash equivalent before any employee contribution is €25,000 x 15% = €3,750.

How to calculate company car BIK

1. Start with the OMV.
2. Deduct the €10,000 general reduction if the car is in Category A1, A, B, C or D.
3. If it is a zero-emission electric car, deduct the additional €20,000 EV reduction for 2026.
4. Identify the CO2 category.
5. Use annual business kilometres to select the percentage.
6. Multiply the reduced OMV by that percentage.
7. Deduct any qualifying amount the employee pays directly to the employer towards running costs.
8. Spread the resulting notional pay over the relevant pay periods and calculate payroll taxes.

Worked example: Category C petrol carOMV €30,000. CO2 120g/km. Annual business travel 22,000km. Category C rate 30%. Reduced OMV is €20,000 after the 2026 €10,000 deduction. Annual cash equivalent is €20,000 x 30% = €6,000. Monthly notional pay is €500.

Employee contributions can reduce the cash equivalent

If the employee pays the employer directly towards the running costs of the car, deduct that amount from the cash equivalent. A lump-sum contribution towards purchasing the car reduces the cash equivalent in the first year only.

20% reduction for qualifying low-business-kilometre employees

A further 20% reduction can apply where the employee travels between 8,000 and 24,000 business kilometres a year, works at least 20 hours a week on average, spends at least 70% of working time away from the employer’s premises and keeps a logbook recording business kilometres and work purposes.

Treat the logbook as part of the relief, not an optional extra. If the records are missing, do not assume the 20% reduction is available.

Mileage records when evidence is incomplete

Good mileage records protect the business-mileage band you use. Revenue can ask for the employee’s business and private mileage details and the supporting logbook. Where adequate evidence is not supplied, Revenue may estimate business mileage by deducting 8,000 kilometres from total mileage for private use. That is an estimating rule, not a record-keeping shortcut.

A useful log should show the date, journey, business purpose and distance. For the 20% low-mileage reduction, Revenue expects a daily logbook and the employer should be able to stand over it. Do not try to reconstruct a year of business travel from calendar entries after a Revenue query arrives.

Cars that are not available for the full year

Where a car is only available for part of the year, reduce the annual cash equivalent for the days it was unavailable. Business kilometres can be annualised to identify the correct mileage band for the period of availability.

Part-year exampleAn employee has a Category C car for 153 days and travels 12,000 business kilometres during that period. Annualised mileage is 12,000 x 365 / 153 = 28,627km, so the 26,001 to 39,000km band is used before the annual cash equivalent is reduced for the 153 days of availability. Any qualifying employee contribution is then deducted.

Pool cars

No BIK arises on a qualifying pool car where it is genuinely shared by more than one employee, no one employee normally has exclusive use, any private use is incidental and it is not normally kept overnight at or near an employee’s home.

Company van BIK 

Vans have their own BIK rules. A vehicle must meet the Revenue van definition: it is made solely or mainly for carrying goods, has a roofed area behind the driver, has no side windows or seating in that area and has a gross vehicle weight not exceeding 3,500kg.

For 2026, the cash equivalent is 8% of the van’s reduced OMV. A €10,000 general OMV reduction applies before the 8% calculation.

The van definition is worth checking before you calculate anything. A vehicle that does not meet all four Revenue conditions may be treated as a car instead, which can produce a very different BIK result. Revenue also provides a separate weight exemption for vans with a gross laden weight above 3,500kg.

If the employee pays the employer directly towards the van’s running costs, that payment reduces the cash equivalent. If the van is only available for part of the year, reduce the annual value for the days of availability in the same way as the Revenue examples.

Standard van exampleOMV €28,000. Less the 2026 €10,000 reduction = €18,000. Annual BIK is €18,000 x 8% = €1,440. Monthly notional pay is €120 before considering any employee contribution towards running costs.

Electric vans

Electric vans receive an additional €20,000 OMV reduction in 2026, as well as the €10,000 general van reduction. A qualifying electric van must run on electricity only. Hybrid vans do not qualify for the electric-van reduction.

Electric van exampleAn electric van with an OMV of €60,000 receives a €20,000 electric-vehicle reduction and the €10,000 general reduction in 2026. Reduced OMV is €30,000. At 8%, annual BIK is €2,400.

Limited private use exemption

A van can be exempt from BIK under the limited-private-use rule only when all three conditions are met:

• The van is provided for work and the employee is required to bring it home after work.
• The only private use is travelling to and from work.
• The employee spends at least 80% of working time away from the employer’s premises.

This is different from a van-pool exemption. Do not use a general “private use is incidental” policy as a substitute for the three limited-use conditions.

Van pools

A qualifying van pool must be genuinely shared, not normally used by one employee to the exclusion of others, have only incidental private use and not normally be kept overnight at or near employees’ homes.

Employer-paid health insurance

When you pay an employee’s medical insurance premium, the gross premium is the taxable BIK value. Add that gross amount to notional pay even though the insurer may apply Tax Relief at Source (TRS) to reduce the amount the employer actually pays.

From 1 January 2026, Medical Insurance Relief is generally 20%, limited to a premium of €1,000 for an adult and €500 for a child. That means a maximum credit of €200 per adult and €100 per child. Where a policy contains dental cover that includes non-qualifying elements, a blended rate can apply to that part of the policy.

If the employer pays the premium and the employee is taxed on the full gross cost through payroll, the employee may be able to claim Medical Insurance Relief through myAccount. The claim is made by the employee, not added manually by payroll.

The important distinction is between the amount the employer physically pays the insurer and the BIK value. The insurer may give the employer TRS as a discount, but payroll still taxes the employee on the full gross premium. The employee can claim Medical Insurance Relief in-year or for a previous year through myAccount where the qualifying conditions are met.

If the employer pays only part of a policy, the employee’s relief is restricted to the amount the employer paid. Keep the insurer breakdown by insured person because the adult and child caps apply separately.

Medical Insurance Relief is an employee tax-credit question rather than something payroll can add manually. For the wider 2026 credit and relief rules, see our Irish Tax Credits and Reliefs guide.

Health insurance exampleGross annual premium €2,500 for one adult. The insurer applies €200 TRS, so the employer pays €2,300. The BIK value remains €2,500. If processed monthly, notional pay is €208.33 per month. The employee may separately claim Medical Insurance Relief, subject to the Revenue conditions.

Small Benefit Exemption

From 1 January 2025, an employer can provide up to five qualifying non-cash benefits each year, with a combined value of no more than €1,500. The 2026 rules are unchanged.

The exemption is about the benefit itself, not an annual cash allowance. A voucher can qualify only where it can be used to buy goods or services and cannot be redeemed, in whole or in part, for cash. Unused allowance cannot be carried into the next year.

Salary sacrifice is also outside the exemption. If an employee gives up salary to fund the voucher or benefit, treat the arrangement under the normal payroll rules rather than trying to use the Small Benefit Exemption.

What happens if the annual limit is exceeded?

Do not retrospectively tax benefits that already qualified. The benefit that fails the conditions is the taxable one.

Example: the later voucher is taxableFebruary: €1,300 voucher, exempt. June: €200 voucher, exempt. The combined qualifying value is now €1,500. A further €500 voucher in November does not qualify and is taxable in full. The February and June benefits remain exempt.

Every qualifying Small Benefit Exemption item must also be reported under ERR on or before it is provided. This does not make the benefit taxable. It is a separate reporting requirement.

Other taxable benefits employers commonly meet

Preferential loans

A preferential loan arises where an employee or their spouse receives a loan from the employer at no interest or below the specified rate. The BIK is the difference between the interest actually paid and the interest that would arise at the specified Revenue rate.

• Qualifying home loans: 4% specified rate.
• All other preferential loans: 13.5% specified rate.

These rates were current on 31 August 2026. If the balance changes during the year, use the appropriate balance and period of availability rather than assuming the opening balance applies for 12 months.

The calculation can use the reducing balance or the average balance for the year, together with the period the loan was actually available. For a qualifying home loan, keep the employee’s signed statement confirming the qualifying use. If the employer later writes off part of the loan, the amount written off becomes taxable in the year of write-off.

Preferential loan exampleAn interest-free qualifying home loan of €20,000 creates an annual benefit of €800 at the 4% specified rate, before adjusting for any shorter period of availability. The same €20,000 used for a non-qualifying purpose would create a €2,700 annual benefit at 13.5%.

Employer-provided accommodation

Employer-provided accommodation is normally taxable. For employer-owned property, use the annual market rent plus related expenses paid by the employer, such as light and heat. If the accommodation is furnished, the furniture can create a separate BIK based on 5% of its value when first provided as a benefit.

If the employer leases the property in its own name, the rent paid, less any employee contribution, is generally relevant to the BIK. If the lease is in the employee’s name and the employer pays the rent, the payment is generally a taxable perquisite.

An exemption can apply where an employee must live on the employer’s business premises to perform the job properly. That accommodation exemption does not apply to a director.

For employer-owned accommodation, support the market rent with evidence such as a local estate-agent or auctioneer valuation and review the value each year. If the property is furnished, the furniture is a separate benefit, generally valued at 5% of the market value when it was first provided by the employer as a benefit.

Temporary accommodation can have different treatment where an employee is working at a temporary location and the employer provides reasonable accommodation and meals instead of subsistence. Do not assume every employer-paid hotel or apartment is ordinary accommodation BIK. The facts of the work location and the expense rules matter.

Private use of company assets

For assets such as equipment or furniture provided for private use, the annual BIK value is generally 5% of the market value when the asset was first provided, less any amount the employee pays the employer for using it.

The 5% value continues to be based on the value when the asset was first provided as a benefit, even if the asset later falls in value or moves to another employee. If ownership is transferred to the employee, or the asset is sold to them below market value, the transfer itself can create a separate BIK based on market value at that point.

Shares and share options

Employee share arrangements need their own tax analysis because the treatment differs by scheme. Unapproved share-option gains realised on or after 1 January 2024 are taxed through payroll for Income Tax, USC and employee PRSI. Employer PRSI can be exempt on qualifying share-based remuneration, but not on every cash-settled award.

Payroll reporting does not replace the annual employer share-reporting obligations. The standard filing deadline for share-related annual returns is 31 March following the year in which the activity arose. The return depends on the arrangement, so RSS1 is not the only form an employer may need.

Do not group every share arrangement under one tax label. Approved Profit-Sharing Schemes, SAYE, KEEP, ordinary share awards and unapproved options have different conditions and different tax outcomes. The payroll team needs the scheme type and transaction date before deciding what should be withheld.

PAYE Settlement Agreements

A PAYE Settlement Agreement (PSA) lets an employer settle the Income Tax, USC and PRSI on minor and irregular non-cash benefits rather than taxing each employee through normal payroll.

• Apply to Revenue in writing by 31 December of the relevant tax year.
• The benefit must be minor and irregular.
• Cash wages, salaries and bonuses do not qualify.
• Large benefits such as company cars, accommodation and preferential loans do not qualify.
• Round-sum allowances do not qualify.
• The tax due under the PSA must be paid within 23 days after the end of the tax year. If it is not, the PSA is null and void.

The Small Benefit Exemption and a PSA are not interchangeable. Revenue’s PSA manual states that a benefit which qualifies for the Small Benefit Exemption cannot simply be moved into a PSA to preserve the SBE allowance for something later in the year.

Common tax-free employer benefits

A benefit can be tax-free only when the relevant conditions are met. The absence of a BIK charge does not always mean there is no reporting obligation.

Cycle to Work

The Cycle to Work Scheme allows the employer to buy qualifying bicycles and safety equipment without a BIK charge, subject to the following limits:

• Other bicycles: €1,250.
• Pedelecs and e-bikes: €1,500.
• Cargo and e-cargo bikes: €3,000.

The employer must buy the bicycle. The exemption does not apply where the employee buys it and the employer reimburses them. A properly structured salary-sacrifice arrangement can reduce the employee’s Income Tax, USC and PRSI because the sacrifice reduces taxable gross pay.

An employee can normally use the scheme once every four years, and the bicycle must be mainly used for qualifying journeys between home and the normal place of work. If salary sacrifice is used, the arrangement must genuinely alter the terms of employment and be recorded in writing. It cannot be retrospective or exchanged back into cash.

Remote working allowance

You can pay up to €3.20 per qualifying remote-working day without deducting Income Tax, PRSI or USC, provided the remote-working conditions are met. Report the number of days, amount paid and payment date under ERR.

The tax-free payment is not available simply because someone answers emails from home occasionally. There must be an arrangement to work from home and the employee must perform substantive duties there for substantial periods. Any amount above €3.20 per workday is taxable unless it is a separately vouched reimbursement that satisfies another rule.

Travel and subsistence

Qualifying business travel and subsistence expenses can be repaid tax-free where Revenue’s conditions are satisfied. Civil service rates can be used in appropriate cases, but the journey itself must qualify. Home-to-work travel does not become tax-free simply because it is reimbursed.

Travel and subsistence payments that are made tax-free within the relevant rules are reportable under ERR. If the payment does not meet the tax-free conditions, deal with the taxable amount through payroll.

You can use current Civil Service rates, a lower rate, or reimburse actual vouched costs where the journey qualifies. If you want to pay subsistence above the Civil Service rates, Revenue approval is required in advance. The rate does not make a non-business journey tax-free, so get the journey classification right before looking at the euro amount.

Employer-installed EV home charger

A BIK exemption can apply from 1 January 2025 where an employer installs an electric-vehicle charging point at an employee’s or director’s home. The employer must retain ownership, the person must have private use of an employer-provided electric vehicle, and the charger must be installed at the person’s sole or main private residence in the State. The home-charger exemption does not apply where the employer-provided vehicle is a hybrid.

Employer pension contributions and MyFutureFund

Employer contributions to an Occupational Pension Scheme, PRSA or PEPP are generally not BIK. From 1 January 2025, employer contributions to a PRSA or PEPP are subject to a limit of 100% of the employee’s salary. Any excess creates a BIK charge.

MyFutureFund sits outside ordinary BIK valuation and has its own statutory contribution process. Contributions are calculated using gross pay reported to Revenue and collected by NAERSA. Employer contributions to the Auto Enrolment Retirement Savings System are not treated as relevant emoluments for USC. Keep the MyFutureFund workflow separate from normal employee-benefit valuation and ERR.

Meals and long-service awards

From 1 October 2025, meals provided on the employer’s business premises can be tax-free where they are available to all staff. If meals are only available to selected staff, BIK can arise unless another exemption applies. Meal vouchers are taxable unless they qualify for an exemption such as the Small Benefit Exemption.

A working lunch for a smaller group can also avoid BIK where there is a genuine operational requirement, the meal is consumed on the employer’s premises and the cost stays within the relevant Civil Service daily subsistence limit. Off-site restaurant meals provided as a staff benefit are generally taxable. Keep ordinary staff hospitality separate from genuine business entertainment expenses repaid to an employee.

A long-service award can be tax-free where service is at least 20 years, the award is a tangible item rather than cash or a voucher, the cost is no more than €50 for each year of service and no similar award has been made to that employee within the previous five years.

Enhanced Reporting Requirements and BIK

ERR has applied since 1 January 2024. It is a separate real-time reporting obligation for three categories of tax-free employee payment or benefit:

• Travel and subsistence.
• Remote working daily allowance.
• Small Benefit Exemption.

Report ERR details on or before the date the payment or benefit is provided. This is separate from the Payroll Submission Request used for taxable pay and taxable BIK.

For the Small Benefit Exemption, report the date and value. For the remote working allowance, report the number of days, amount and date paid. Travel and subsistence reporting is broken down into the relevant vouched and unvouched categories. Revenue sets out the data required for each ERR category.

ERR applies to payments and benefits provided to employees and directors. The reporting obligation does not make a qualifying payment taxable. It gives Revenue visibility of items that the employer is treating as tax-free, so the underlying records still need to support that treatment.

The scale is now significant. Revenue’s 2025 Annual Report recorded more than 1.6 million ERR submissions covering over 13.5 million reportable benefits worth about €2 billion.

RSM Ireland reported in June 2026 that employers were receiving Level 1 compliance interventions where ERR filings were missing, incomplete or incorrect. That is a professional-firm observation of current compliance activity, not a separate Revenue rule.

Do not wait until year-end to fix ERR If your ERR records are incomplete, identify the missing items and correct the reporting position. Starting to file correctly from today does not repair earlier gaps.

BIK payroll checklist for employers

• Identify every taxable benefit before payroll is processed.
• Use the valuation rule for that specific benefit. Do not apply a generic market-value estimate to cars, vans, accommodation or preferential loans.
• Set up recurring notional pay for benefits that continue across the year.
• Review company-car mileage and BIK at least quarterly.
• Keep OMV evidence and mileage logs for company vehicles.
• Track the number and cumulative value of Small Benefit Exemption items before each new benefit is provided.
• Report qualifying SBE benefits, remote-working allowances and tax-free travel/subsistence under ERR on or before the relevant date.
• Use the gross premium for employer-paid medical insurance BIK.
• Review active benefits at the start of each tax year because rates and reliefs can change.
• Keep payroll and supporting BIK records for at least six years after the end of the relevant tax year.

Benefits in Kind FAQs

Keep the benefit, payroll and reporting treatment aligned

The main BIK risk is applying the wrong rule to the benefit, using an out-of-date vehicle value or rate, or reporting a tax-free item in the wrong place. Build the benefit review into payroll when the benefit starts, not when the year is nearly over.

For company vehicles, keep the OMV and mileage evidence. For staff rewards, check the Small Benefit Exemption before the benefit is handed over. For ERR items, report on time. If a benefit does not fit a standard category, establish the tax treatment before it is added to the employee package.

General information

This guide is based on Revenue and Department of Social Protection guidance. It is general information, not tax, legal or financial advice. The correct BIK treatment can depend on the facts of the employment and benefit arrangement.