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Budget 2026 was announced on 7 October 2025. It is the first Budget of this Government's term and described by the Minister as an investment in our future while securing the jobs, prosperity and stability of today.
The Minister announced a range of tax cuts and expenditure measures worth €9.4 billion, along with an overall Budget surplus for 2026 of €5.1 billion. It was also announced that Ireland will continue to invest in the two long-term savings funds established in 2025, which are projected to have built up around €24 billion by the end of next year.
Several measures were announced to tackle the housing crisis and increase much-needed supply. The key measures include a capital investment of €5 billion to support housing delivery next year and an additional €200 million in external funding to finance homebuilders through Home Building Finance Ireland. The Minister announced that the VAT rate on the sale of completed apartments will be reduced from 13.5% to 9% effective from 8 October 2024 until 31 December 2030. Other key tax measures include a corporation tax exemption for rental profits arising from certain homes that fall within a Cost Rental Scheme and enhanced corporation tax deductions for certain costs incurred on the construction of apartments and conversion of non-residential buildings into apartments. The Minister also announced the replacement of the Derelict Sites Levy with a new Derelict Property Tax, improvements to the existing Residential Development Stamp Duty Refund Scheme and a three-year extension of the existing income tax relief for retrofitting expenses incurred by small landlords.
There were few material changes announced in relation to the cost of living for inpiduals. Measures were announced to ensure that full-time workers on the minimum wage will remain outside the top rates of Universal Social Charge, a three-year extension of the Rent Tax Credit to 2028 and the extension of the Mortgage Interest Tax Relief for a further two years. The currently reduced 9% rate of VAT on gas and electricity will be extended until 31 December 2030.
From an international tax perspective, subject to EU State Aid approval, the Minister announced several improvements to the R&D tax credit regime, including a welcome increase of the credit from 30% to 35% and the publication of an R&D compass in the coming weeks, which will consider further targeted changes to the regime. Various simplifications and technical amendments will be made to the participation exemption for foreign pidends. The Minister also published an Action Plan today to reform Ireland's tax regime for interest, with a further consultation period expected. Various enhancements and changes were also announced to the visual effects and digital games incentives, which are also subject to EU State Aid approval.
Other targeted measures from a jobs and investment perspective include enhancements to the Capital Gains Tax Revised Entrepreneur's Relief, the Special Assignee Relief Programme, the Key Employee Engagement Programme and the Foreign Earnings Deduction. The well-flagged reduction of the VAT rate on food and catering businesses and for hairdressing services from 13.5% to 9% was also confirmed, effective from 1 July 2026. The Minister also announced a reduction of the tax rate applicable to Irish and equivalent offshore funds and foreign life assurance products from 41% to 38%. Also, to attract retail investors to the Irish market, a new Stamp Duty exemption was announced on the acquisition of shares in Irish listed companies with a market capitalisation of below €1 billion, expiring on 31 December 2030.
In our Budget 2026 briefing, we highlight the key budgetary measures that will impact inpiduals and companies. Further details will be set out in the Finance Bill, which is expected to be published next week. As usual, on tax matters, the devil will be in the detail.
Please click the accordions below for the key taxation measures of Budget 2026.
Highlights
Financial Summary
The Minister for Finance announced a total Budget package of €9.4 billion, consisting of €8.1 billion in expenditure measures and €1.3 billion in tax measures. The Minister confirmed that the Budget surplus will be €10.2 billion for 2025 and €5.1 billion for 2026.
Corporation Tax
Whilst the Minister acknowledged the volatility in Corporation Tax receipts in recent months, he noted that Ireland will continue to invest in the two long-term savings funds established in 2025, to help tackle future demographic and structural challenges. It is expected that these funds will have a value of circa €24 billion by the end of 2026 and €40 billion by the end of the Government's term.
International
The participation exemption on the foreign pidends regime came into effect on 1 January 2025. The exemption aims to simplify the existing double taxation relief provisions for Irish companies with foreign subsidiaries and to ensure that Ireland remains attractive to foreign direct investment. Finance Bill 2025 will introduce various enhancements, which are welcomed, including an expansion to the geographic scope of the exemption.
The R&D Tax Credit regime will be further enhanced through various measures, including an increase in the rate from 30% to 35% on all qualifying R&D expenditure and an increase in the first-year payment threshold from €75,000 to €87,500. The Minister also announced that further targeted changes will be considered and that an 'R&D Compass' report will be published in the coming weeks.
The Minister also announced targeted amendments to Ireland's tax credit regimes for the film and digital games sectors, which are subject to approval by the European Commission.
Domestic
The Minister announced a reduction in the VAT rate from 13.5% to 9% for businesses in the food and catering sectors, as well as those providing hairdressing services, effective from 1 July 2026.
The lifetime limit for Revised Entrepreneur Relief on gains of up to €1 million is being increased to €1.5 million from 1 January 2026. Revised Entrepreneur Relief provides for a reduced tax rate on capital gains of 10%, subject to the lifetime limit.
In respect of capital markets, a new exemption from the 1% rate of Stamp Duty on the acqusition of shares in Irish-registered companies will be introduced. It will apply to companies with a market capitalisation below €1 billion, where the shares of the companies are admitted for trading on a regulated market, a multilateral trading facility, or an equivalent third-country market.
The Minister also confirmeda reduction in the rates of taxation with respect to certain Irish and equivalent offshore funds, as well as foreign life assurance products, from 41% to 38%.
Property
The VAT rate applicable to the sale of completed apartments will be reduced from 13.5% to 9% with effect from 8 October 2025 until 31 December 2030.
The Minister has announced a new exemption from Corporation Tax for rental profits arising from homes that come within the remit of the Cost Rental Scheme. It will apply in respect of certain properties from 8 October 2025.
A new enhanced Corporation Tax deduction will be introduced for certain costs incurred on the construction of apartment developments and for the conversion of non-residential buildings into apartments. The measure will allow an enhanced deduction of 125% of qualifying costs, up to a maximum additional deduction of €50,000 per apartment unit.
The Minister has announced a new Derelict Property Tax that will replace the current Derelict Site Levy. The tax will be collected by the Revenue Commissioners and will not be lower than the 7% Derelict Site Levy. The introduction of this tax will be implemented over the coming years and detailed in the Finance Bill 2026.
The Residential Development Stamp Duty Refund Scheme has been extended to 31 December 2030.
Employment and Income Tax
Extensions to the Key Employee Engagement Programme (KEEP), the Special Assignee Relief Programme (SARP) and the Foreign Earnings Deduction (FED) were announced in Budget 2026. KEEP will be extended to 31 December 2028, subject to approval from the European Commission. SARP and FED will be extended for five years to 31 December 2030.
The Minister announced an adjustment to the Universal Social Charge (USC), noting that the ceiling of the 2% USC rate will be increased by €1,318 from €27,382 to €28,700. This is to ensure that workers on minimum wage do not fall into the higher rates of USC.
Tax bands and allowances remain unchanged.
Consultations and Initiatives
An Action Plan for Reform of Ireland's Taxation Regime for Interest was published shortly after the Minister's speech. The Action Plan followed extensive consultation by the Department of Finance with the relevant stakeholders, aimed at improving and maintaining the competitiveness of Ireland's Corporation Tax code. The Minister noted that a feedback statement will be published in November for further consultation and that legislative reform would be carried out on a phased basis.
The Minister acknowledged the important role played by withholding taxes in Ireland's tax system and noted that a joint public consultation between the Department of Finance and Revenue will be launched shortly, with a view to exploring opportunities to modernise, digitalise, and further expand the scope of these taxes.
The Minister also announced the Government's intention to publish a roadmap detailing its approach to simplifying and modernising the tax system around retail investment through the funds sector.
Personal
Compared to recent years there were minimal changes to personal tax matters announced in Budget 2026. The key measures announced which will affect inpiduals and households are discussed below.
Universal Social Charge (USC)
In last year's Budget, the Minister announced a reduction in the USC rate from 4% to 3%, along with an increase in the 2% USC band ceiling by €1,622 to €27,382 in 2025.
The 2% USC band ceiling is increased by €1,318 to €28,700, effective from 1 January 2026. This ensures full-time minimum wage earners remain outside the higher USC rates, while also providing a modest benefit to other workers.
The following USC rates will apply from 1 January 2026:
€0 – €12,012 | 0.5% |
€12,013 – €28,700 (increased from €27,382 in 2025) | 2% |
€28,701 – €70,044 | 3% |
€70,045+ | 8% |
Self-employed income over €100,000 | 3% surcharge |
The USC concession for medical card holders earning less than €60,000 per year will be extended to the end of 2027.
Rent Tax Credit
The Rent Tax Credit of €1,000 (€2,000 for jointly assessed couples) has been extended to the end of 2028.
Mortgage Interest Relief
In Budget 2024, a temporary tax break was provided for taxpayers with a mortgage on their principal private residence whose balance outstanding on 31 December 2022 was between €80,000 and €500,000. Subject to compliance with all Local Property Tax obligations in respect of their principal private residence, taxpayers were entitled to tax relief at 20% of the increase in interest payable on their mortgage in 2023 compared to 2022. The maximum relief available to taxpayers was €1,250.
In Budget 2025, the relief was extended for one additional year, allowing eligible mortgage holders to claim relief on the increase in interest paid in 2024 over 2022.
In Budget 2026, the relief is extended for a further two years allowing relief to be claimed on the increase in interest paid in 2025 and interest paid in 2026 over 2022. The maximum credit available for 2026 is reduced to €625.
Revised Entrepreneur Relief
Revised Entrepreneur Relief allows inpiduals to pay a reduced Capital Gains Tax rate of 10%, instead of the standard 33%, on qualifying business asset disposals, provided that certain conditions are met.
Budget 2026 increases the current €1 million lifetime limit on gains to €1.5 million for disposals made on or after 1 January 2026.
Foreign Earnings Deduction
The Foreign Earnings Deduction (FED) is an income tax relief for Irish resident inpiduals who temporarily carry out duties of their office or employment in certain countries. The Minister announced that FED will be extended to 31 December 2030 and the maximum amount of income that may be relieved from income tax in any tax year will be increased from €35,000 to €50,000. The Philippines and Turkey will also be added to the list of qualifying countries. Other administrative changes will be set out in Finance Bill 2025.
Electric Vehicles
A number of measures were announced to support the adoption of electric vehicles.
The €5,000 Vehicle Registration Tax relief for fully
electric vehicles which was due to expire on 31 December 2025 will
be extended by one year to 31 December 2026.
A new category of reduced Benefit-in-Kind (BIK)
rates will be introduced for zero emissions electric vehicles
provided by employers, with rates ranging from 6% to 15% depending
on business mileage.
For BIK on cars in categories A to D and all vans, the temporary universal reduction in the Original Market Value introduced in 2023 will be extended for three additional years, ending on 31 December 2028. The relief will remain at €10,000 for 2026, then decrease to €5,000 in 2027 and €2,500 in 2028.
Micro-Generation of Electricity
Profits up to €400 from energy generation or from the sale of surplus electricity to the grid are currently exempt from Income Tax in the hands of certain qualifying inpiduals.
This exemption will be extended for a further three years to 31 December 2028.
Pensions
Although not announced in the Minister's speech, the accompanying publication by the Department of Finance notes that Finance Bill 2025 will include amendments to the tax treatment for the Auto Enrolment (AE) Retirement Savings Scheme. These will include various changes to the tax treatment of AE retirement savings on the death of the participant, an exemption from investment undertaking tax for AE provider schemes and an exemption from USC for employer contributions to AE.
VAT on Gas and Electricity
The reduced 9% VAT rate on gas and electricity has been extended until 31 December 2030.
Excise Duty on Tobacco Products
With effect from 8 October 2025, the excise duty on a pack of 20 cigarettes will increase by 50 cents (inclusive of VAT) with a pro-rata increase on other tobacco products.
Business
Reduced 9% VAT Rate for Hospitality Sector and Hairdressers
The VAT rate for businesses operating in the food and catering sector, as well as those providing hairdressing services, will be reduced from 13.5% to 9%, effective from 1 July 2026.
Extension of the Reduced 9% VAT Rate on Gas and Electricity
The reduced VAT rate of 9% on gas and electricity is due to expire on 1 November 2025. The Minister announced an extension of this reduced rate until 31 December 2030.
Research and Development (R&D) Tax Credit Enhancements
Following a review by the Department of Finance, the R&D tax credit regime will be improved as follows:
- The credit rate will increase from 30% to 35%;
- The first-year payment threshold will be increased from €75,000 to €87,500; and
- 100% of an R&D ' 'employee's emoluments may be claimed as qualifying expenditure, provided they spend at least 95% of their time on eligible R&D activities.
An "R&D Compass" will be published in the coming weeks, outlining strategic priorities for the future innovation supports.
Participation Exemption on Foreign pidends
A new participation exemption for foreign pidends was introduced, effective from 1 January 2025. Broadly, the exemption applies to foreign pidends received from double tax treaty countries and EU countries. It operates, subject to certain conditions, by exempting the receipt of qualifying foreign pidend income from Irish corporation tax in the hands of the recipient.
The Minister confirmed that the exemption will be enhanced and extended through various measures to be included in the Finance Bill 2025, including:
- An extension of the geographical scope to include jurisdictions that impose non-refundable pidend withholding tax;
- A reduction to the tax residency requirement from five years to three years; and
- Clarification on scenarios which do not qualify for the exemption.
Further details will be included in the Finance Bill 2025.
Ireland's Interest Regime
The Minister announced the publication of an Action Plan to reform Ireland's tax regime for interest. The reform will be implemented in phases. The Action Plan is based on responses received to an extensive consultation carried out by the Department of Finance on the tax treatment of interest in Ireland.
It is intended that the proposed reform will safeguard Ireland's competitiveness, provide administrative simplification and provide greater certainty to Irish businesses, while also ensuring that Ireland's corporation tax system for interest remains fair and sustainable.
A feedback statement will be published on 21 November 2025 to facilitate further consultation. Draft legislation will be published for further stakeholder feedback on 16 April 2026. It is intended that legislative changes from the first phase of review will be included in the Finance Bill 2026.
Audiovisual Sector
The Minister announced targeted amendments to ' 'Ireland's tax credit regimes for the film and digital gaming sectors.
The existing Film Tax Credit will be enhanced to include a new 40% credit for productions that incur at least €1 million in eligible expenditure on Visual Effects (VFX). This elevated rate will apply to qualifying VFX expenditure up to a maximum of €10 million per production.
The Digital Games Tax Credit will be extended until 31 December 2031. The scope of the credit will be broadened to allow claims for Post-Release Content development (subject to specific conditions).
Both of these enhancements are subject to approval by the European Commission.
Stamp Duty Exemption for Irish SME's and Start-Ups Trading on Regulated Markets
The Minister announced the introduction of a new exemption from the 1% stamp duty rate on share acquisitions in Irish-registered companies. The exemption will apply to shares in companies listed on regulated markets, multilateral trading facilities, or equivalent third-country exchanges, provided the ' 'company's market capitalisation is below €1 billion. This exemption will remain in effect until 31 December 2030.
The existing stamp duty exemption for shares traded on the Euronext Growth Market (formerly the Enterprise Securities Market) will be discontinued as a result of this new measure.
Key Employee Engagement Programme (KEEP)
The KEEP, a tax-efficient share option scheme designed to help SMEs attract and retain key employees, will be extended to 31 December 2028. This measure is subject to approval by the European Commission and implementation by Ministerial Order.
The Special Assignee Relief Programme (SARP)
SARP, which provides income tax relief to certain foreign employees assigned to work in Ireland, is being extended for five years until 31 December 2030.
From 1 January 2026, new entrants must earn an annualised salary of at least €125,000 to qualify (previously €100,000). Qualifying employees may claim an income tax relief on 30% of annual employment income between €125,000 and €1 million.
Existing participants will not be affected by this change. Amendments will also be introduced to simplify the ' 'scheme's administrative requirements.
VAT Modernisation and Electronic Invoicing
Recently agreed changes to EU VAT law will impact VAT administration across the EU. Revenue will begin a phased rollout of domestic electronic invoicing arrangements for business-to-business transactions. Further details of this initiative will be announced on 8 October 2025.
Carbon Tax
The Carbon Tax on auto fuels will increase from €63.50 to €71 per tonne of CO₂ from 8 October 2025. This new rate will take effect for all other fuels on 1 May 2026.
Intangible Assets
Although not mentioned in the Minister's speech, the scheme for claiming capital allowances on intangible assets will be amended from 8 October 2025. The amendment means that a balancing allowance on such assets is subject to the 80% cap for tax relief purposes.
Accelerated Capital Allowance Schemes
The following Accelerated Capital Allowance schemes will be extended to 31 December 2030:
- The Accelerated Capital Allowances Scheme for Energy Efficient Equipment allows businesses to claim the full cost of highly energy-efficient equipment as a tax deduction in the first year.
- The Accelerated Capital Allowances Scheme for gas vehicles and refuelling equipment provides a tax incentive for businesses that invest in vehicles running on compressed natural gas, liquefied natural gas, biogas, or hydrogen, as well as related refuelling equipment.
Property
Corporation Tax Deduction for Apartment Development
A new enhanced corporation tax deduction will be introduced for certain costs incurred by companies in constructing apartments or converting non-residential buildings into apartments, on projects where a commencement notice is submitted on or after 8 October 2025 and on or before 31 December 2030.
Companies that incur qualifying costs will be entitled to take a deduction of 125% of the actual costs incurred, up to a maximum of €50,000 per apartment, providing a net tax benefit of up to €6,250 (at the current corporation tax rate of 12.5%) per apartment.
The enhanced deduction will apply to projects for the development or conversion of 10 or more apartments. In order to qualify for the enhanced deduction, a company must be the beneficial owner of the developed / converted apartments at the time the project is completed. The enhanced deduction will be claimable upon completion of the project, when a Certificate of Compliance on Completion is signed.
VAT Rate for New Apartments
The VAT rate applicable on the sale and supply of newly constructed apartments will be reduced from 13.5% to 9% with effect from 8 October 2025 until 31 December 2030.
The apartment must be in an 'apartment block' which is defined as a multi-storey residential property comprising at least three apartments with grouped or common access.
Residential Development Stamp Duty Refund Scheme
The Residential Development Stamp Duty Refund Scheme (Scheme) was introduced in 2017 and allows for a partial refund of stamp duty paid on the acquisition of non-residential land which is subsequently used for the development of residential units.
The Scheme was previously due to expire at the end of 2025 and has now been extended until 31 December 2030.
Under the conditions of the Scheme, the development of the residential units must commence and be completed within 30 months of the date of acquisition of the land. This timeframe has now been increased to 36 months.
For developments that are carried out on a phased basis, an applicant under the Scheme could previously only apply for a refund of the Stamp Duty on a phase-by-phase basis and once the inpidual phase had commenced. The Scheme will now allow for a refund to be claimed in respect of the entire development upon commencement of the first phase of the development.
Living City Initiative
The Living City Initiative (LCI) was introduced in 2015. It provided various tax reliefs for expenditure on refurbishing or converting residential and commercial properties in designated "special regeneration areas" in Irish cities.
The LCI reliefs, due to end on 31 December 2027, have been extended until the end of 2030. The building age restriction for qualifying properties under the LCI has also been widened to include any residential properties constructed prior to 1975.
A new tax relief category will be introduced under the LCI to support the conversion of commercial properties into residential premises, including the utilisation of "over the shop" premises for residential purposes, with no building age restriction applying to this category.
The maximum tax relief claimable by enterprises under the LCI will also be increased from €200,000 to €300,000.
The LCI's regional scope will also be extended to admit special regeneration areas in Athlone, Drogheda, Dundalk, Letterkenny and Sligo.
The Finance Bill 2025 will include further details on the changes to the LCI, including provisions for increased flexibility in claiming tax reliefs under the LCI.
Derelict Property Tax
Under the Derelict Sites Act 1992, Local Authorities can place properties within their jurisdiction on a register of derelict sites. A derelict site is defined as any land which materially detracts, or is likely to detract from the amenity, character or appearance of the land in its neighbourhood. Currently, Local Authorities can charge a Derelict Site Levy to the owners of property on a derelict site register at 7% of the land's market value.
A new Derelict Property Tax, to be implemented and collected by Revenue, will replace the Derelict Site Levy. It is envisaged that the Derelict Property Tax will be charged at a rate at least equivalent to the current 7% Derelict Site Levy.
The new Derelict Site Tax is expected to be legislated for in next year's Finance Bill. Local Authorities will identify derelict sites in their areas in 2026, and preliminary derelict property registers will be released in 2027. The Derelict Property Tax will come into effect soon afterwards.
Residential Zoned Land Tax
The Residential Zoned Land Tax (RZLT) applies to land zoned as suitable for residential development, which is not currently developed for housing. The RZLT applies at a rate of 3% of the land's market value.
Landowners could apply to the relevant Local Authority in 2025 to have their land within the scope of RZLT rezoned to reflect the genuine economic activity for which it was used, making it eligible for an exemption from RZLT. The RZLT exemption window will be extended, allowing landowners to apply to Local Authorities for an RZLT exemption in 2026.
Relevant sites which are the subject of An Coimisiún Pleanála proceedings brought by a third party concerning a grant of planning permission will also qualify for an RZLT exemption. Further technical changes to the operation of the RZLT regime will be included in the Finance Bill 2025.
Corporation Tax Exemption for Cost Rental Income
Cost rental schemes were introduced under the Affordable Housing Act 2021 and aim to provide long term secured rental tenure to certain households at below-market-value rents.
From 8 October 2025, a new Corporation Tax exemption will apply to rental profits received by companies from properties designated as 'Cost Rental' properties by the Minister for Housing, Local Government and Heritage.
Landlord Tax Deduction for Retrofitting Expenditure
The income tax relief available to landlords carrying out retrofitting works to rented residential properties will be extended for three years until the end of 2028.
Tax relief was previously claimed against rental income earned in the year after the retrofitting expenditure was incurred. It can now be claimed in the year in which the retrofitting expenditure is incurred. The maximum number of qualifying properties has increased from two to three.
Financial Services
Taxation of Investments
Budget 2026 introduces a reduction in the rates of taxation applicable to certain investment products.
The key changes are as follows:
- Investment Undertaking Tax (IUT): The rate of IUT will decrease from 41% to 38%. This will directly affect Irish Collective Asset Management Vehicles, Authorised Investment Companies and Unit Trusts.
- Life Assurance Exit Tax (LAET): The LAET rate, applicable to policies issued by Irish-domiciled life assurance companies since 2001, will also decrease from 41% to 38%.
- Equivalent Offshore Funds: The tax rate on investments in offshore funds located in the EU, EEA, or OECD Member States with which Ireland has a Double Taxation Agreement and which are deemed equivalent to Irish-domiciled funds, will be reduced from 41% to 38%. This includes Exchange Traded Funds (ETFs) subject to this regime, including Irish-domiciled ETFs.
- Foreign Life Assurance Policies: The tax rate applicable to life assurance policies commenced after 2001 by companies, branches or agencies operating in qualifying jurisdictions (EU, EEA, or OECD Member States with a Double Taxation Agreement with Ireland) will also be reduced from 41% to 38%.
Bank Levy
The Minister confirmed that a revised Bank Levy introduced in 2024 will be extended for another year to 31 December 2026. Similar to 2024 and 2025, the Bank Levy is expected to generate €200 million for 2026.
Public Consultation regarding Withholding Taxes
The Minister announced that a public consultation will be launched with the aim of modernising, digitalising and further expanding the scope of Irish withholding taxes. No timeline has been provided for this consultation yet.
Roadmap for Ireland's Funds Sector
In light of the current complexity of the tax framework governing retail investment and to support the strategic objectives of the Funds Sector 2030 Report, the Minister announced the Government's intention to publish a roadmap detailing its approach to simplifying and modernising the tax system around retail investment. The Minister also announced the publication of an Implementation Plan, which is aligned with the Funds Sector 2030 Report.
The Minister confirmed that the recommendation to introduce an entity-level tax for Irish Real Estate Funds (IREFs) will not be pursued. However, a public consultation will be launched to explore potential simplifications to the existing IREF regime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.