Budget 2026, amounting to €9.4 billion, was presented as a “sensible budget” aimed at maintaining economic stability and strengthening Ireland’s resilience amid global uncertainty. The Government outlined plans to move away from temporary supports toward more targeted and permanent measures, while maintaining a focus on balanced public finances. Framed as both cautious and forward-looking, the Budget sets out to address ongoing pressures in housing, investment, and the cost of living, while supporting employment and economic competitiveness. In his address to the Dáil, Minister for Finance Paschal Donohoe said: “This Budget will boost our resilience. It will protect jobs. It puts us in the best possible position to create a stronger and more competitive economy while meeting the needs of our people today and in the time to come.”

As regards some of the specific taxation measures introduced in the Budget, a summary is as follows:

Personal Taxes

• Increase in the ceiling for the lower 2% rate of USC by €1,318 to €28,700 
• Extends medical-card USC concession through 2027
• Mortgage Interest relief extended for a further two years
• Special Assignee Relief Programme extended for five years with minimum qualifying income increase from €100,000 to €125,000
• Tax on certain funds and life products to be reduced from 41% to 38% along with creation of a simplification roadmap mooted to attract domestic investors.
• Foreign Earnings Deduction extended for five years and increased from €35,000 to €50,000 and Turkey along with the Philippines have been added to the list of relevant states.
• Key Employee Engagement Programme extended to 2028
• Microgeneration of electricity income tax disregard of €400 extended to 2028
• Rent tax credit extended to 2028

Entrepreneurs and Business

• Increase in the lifetime threshold for Entrepreneur’s Relief from €1,000,000 to €1,500,000 for disposals made from 1 January 2026
• Increase in the first year payment threshold in the R&D Tax credit from €75,000 to €87,500
• Increase in the R&D tax credit from 30% to 35%
• Changes to be introduced in relation to the definitions within R&D legislation along with outsourcing rules
• Introduction of a new exemption from stamp duty for Irish startups below a market capitalisation value of €1 billion.
• In relation to the Benefit-in-Kind (BIK) regime for company cars, the Minister extended for a further year the temporary universal relief of €10,000 to the Original Market Value (OMV) which was first introduced in 2023. 
• Review of the complex Irish tax rules for deductibility of interest to be undertaken
• Updating and enhancing rules for participation exemption by expanding their geographic scope
• Accelerated Capital Allowances for energy efficient equipment extended to 2030.

VAT, Indirect Taxes and climate measures

• Extension of the current 9% VAT rate applying to supplies of gas and electricity. That is to continue to the end of December 2030. 
• The current 13.5% VAT rate on food, catering and hairdressing is being reduced to 9%. This should be effective from 1 July 2026.
• The €5,000 relief available in respect of VRT on Electric Vehicles extended through to 2026
• New Pool Betting Duty to be introduced in Budget 2027
• Excise Duty on Cigarettes to be increased by 50 cent per pack
• Carbon Tax to increase to €71 per tonne of CO2 and this applies to car fuels from tomorrow and other fuels from 1 May 2026.

Housing Initiatives

• The Residential Development Stamp Duty refund Scheme has been extended to 2030 with extended limits to be introduced, time limits extended from 30 to 36 months. Also, it was announced, a full refund should be available to claim in respect of a multi-phase development at the commencement of the first phase.
• Extension of relief for landlords for retrofitting properties by three years.
• The Living City Initiative has been extended to 2030 and has been broadened from properties constructed pre 1915 to include those constructed pre 1975. The changes also increases the max relief from €200,000 to €300,000 and adds new regions including Athlone and Sligo.
• In respect of the construction of apartments or the conversion of non-residential premises to higher density apartments there will be enhanced corporation tax deduction on certain costs available and this will be effective from 8 October 2025 through to 31 December 2030
• VAT rate reduced from 13.5% to 9% on sale of completed apartments (effective immediately to December 2030).
• The introduction of an application for an exemption from Residential Zoned Land Tax in 2026 where the land is being actively developed.
• A new Derelict Property tax has been mooted which will replace the current 7% Derelict Site Levy, legislation to be introduced in 2026 with implementation to follow in 2027.

Agriculture

• Extension of various reliefs including Young Trained Farmer Stamp Duty Relief, Farm Consolidation Relief and Farm Restructuring Relief to the end of 2029. 
• Extension of Accelerated Capital Allowances Scheme for Slurry Storage Facilities for four more years.

Audio-visual sector

• An improvement to film tax credit will provide for a new 40% rate of relief for productions that have a minimum of €1 million of eligible expenditure on relevant visual effect work. This is subject to State aid approval and subject to a maximum qualifying spend of €10 million.
• The Digital games Tax Credit has been extended to 2031 and has been expanded to include post release work as well.

In conclusion, with a projected budget surplus of €5.1 billion the Minister for Finance was in the enviable position to announce a number of positive changes in public expenditure and a number of changes in the tax regime. His focus on ensuring Ireland remains competitive along with seeking to reinforce economic stability and support employment is positive. For businesses and individuals alike, understanding the practical impact of these changes will be key in the months ahead.

Author: Mike Scanlon