In a drive to further decarbonise the economy and meet Ireland’s commitment to reduce carbon emissions by 7 percent next year, the rate of carbon tax on auto fuels will increase again this year by €7.50 from €33.50 to €41 per tonne of CO2 from midnight. Budget 2022 also amends both Vehicle Registration Tax rates and the accelerated capital allowance schemes to further encourage the transition to lower-emission fuels. The BIK exemption on electric vehicles is extended to 2025.
Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels.
A 60-litre tank of diesel will increase by an estimated €1.48 from 13 October and a similar tank of petrol will cost an estimated extra €1.28. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels.
Home heating
The price of home heating oil, coal and peat will all increase from 1 May 2022. A 900-litre tank of home heating oil will cost €19.40 more while a 40kg bag of coal will cost 89 cents extra and a 12.5kg bale of peat briquettes will go up by 20 cents. The cost of annual natural gas usage will increase by an average of €16.95.
Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes.
Electrical vehicles – BIK exemption extended
The BIK exemption where an employer makes a battery electric car (both new and used) available to employees has been extended until 2025. This exemption was due to end on 31 December 2022.
There will however be a tapering effect on the vehicle value. For BIK purposes, the original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.
Accelerated capital allowances scheme
Amendment for energy efficient equipment
The accelerated capital allowance scheme for energy efficient equipment, which allows the full cost of expenditure on qualifying energy efficient equipment to be deducted for tax purposes in the year of purchase, has been amended to disallow equipment that is directly operated by fossil fuels from qualifying.
Gas vehicles and refuelling equipment
Introduced in the Finance Act 2018, this scheme allows the full cost of expenditure on qualifying gas vehicles and refuelling equipment used for business purposes to be deducted from taxable profits in the year of purchase. The scheme, which is particularly focused on the heavy-duty land transport sector, was due to end on 31 December 2021 but has been extended until 31 December 2024.
Furthermore, in an effort to encourage the transition to lower-emission fuels, the scheme will be extended to include hydrogen powered vehicles and refuelling equipment.
Income from micro-generation of electricity
A tax disregard of €200 is being introduced for personal income received by households who sell residual electricity generated by them back to the grid.
Vehicle Registration Tax (“VRT”)
In order to reinforce the environmental rationale behind the VRT system, a revised vehicle registration tax table is being introduced from 1 January 2022. This will result in increases in the rates of VRT.
The 20-band table will remain; however, there will be a 1 percent increase for vehicles that fall between bands 9-12; a 2 percent increase for bands 13-15; and then a 4 percent increase for bands 16-20.
The €5,000 relief from VRT for battery electric vehicles is being extended to 31 December 2023.
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