The personal tax measures introduced under Finance Bill 2025 were limited. For employees, the changes provide only a very small piece of financial relief. Given rising inflation and salary levels and no relative increases in bands or credits, individuals will effectively be subject to additional tax by keeping bands and credits static. For employers, the focus of the Finance Bill was on simplifying compliance, extending incentive schemes, and aligning with the broader objective of maintaining Ireland’s competitive employment environment.
The ceiling for the 2% USC rate band has been increased by €1,318, bringing it to €28,700 from the 2026 tax year onwards. This adjustment keeps the USC thresholds in line with increases to the national minimum wage, ensuring that highest USC rate paid by a full time worker on the minimum wage is 2%.
The reduced USC rate for full medical card holders under 70 years of age whose annual income does not exceed €60,000 has also been extended for a further two year until 31st December 2027.
The Rent Tax Credit, first introduced in 2023 as a temporary measure to alleviate the burden of rising housing costs, has been extended for a further three years, up to 31 December 2028. The value and conditions of the credit remain unchanged, but its continuation is a recognition that rental affordability remains a key challenge for many households.
The Bill also extends Mortgage Interest Tax Relief to the 2025 and 2026 tax years. For 2025, relief will apply to the increase in interest paid compared with 2022, subject to a maximum of €1,250. For 2026, relief will be available on 50% of the increase compared to 2022, capped at €625.
The Foreign Earnings Deduction (FED), designed to support Irish based companies expanding into overseas markets, has been extended for a further five years until 31 December 2030. The relief now includes Turkey and the Philippines as qualifying territories from 2026, reflecting Ireland’s deepening trade links with these markets. The maximum amount of income from an office/employment which is subject to relief is increased to €50,000. In addition, the requirement for employees to spend “three consecutive days” working in a relevant state has been removed, giving businesses greater flexibility in how assignments are structured.
The Special Assignee Relief Programme (SARP), a key element of Ireland’s strategy to attract talent, has also been extended for a further 5 years until 31 December 2030. For employees arriving in Ireland on or after 1 January 2026, the minimum qualifying base salary rises to €125,000 from the previous €100,000. In addition, employers will now have up to 180 days from the employee’s arrival to complete the necessary certification (an increase from 90 days). However, where certification occurs after 90 days, the relief period will be capped at four consecutive tax years rather than five if the submission had been made within the 90 days. Therefore, there is still a loss of a year where the application is submitted after the 90 days but before the 180 days elapse post arrival in Ireland.
The Key Employee Engagement Programme (KEEP) which allows small and medium sized enterprises to reward employees through share options without triggering income tax on grant or exercise has been extended to 31 December 2028, subject to EU approval.
From 1 January 2026, a new Category A1 will apply to zero CO2 emission cars for BIK purposes. The existing reductions in Original Market Value (OMV) which reduce the taxable benefit for both conventional and electric vehicles will be extended on a tapered basis.
The 48,001 km lower limit for the highest mileage band which applies to employer provided vehicles will also be retained permanently.
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Disclaimer: While every effort has been made to ensure the accuracy of information within this publication is correct at the time of going to print, RBK do not accept any responsibility for any errors, omissions or misinformation whatsoever in this publication and shall have no liability whatsoever. The information contained in this publication is not intended to be an advice on any particular matter. No reader should act on the basis of any matter contained in this publication without appropriate professional advice.
Author: Laura Melia (01) 6440100
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