Budget 2026 headlines

Income Tax & Capital Gains Tax

No change made to income tax rates, credits and thresholds. A previously legislated for increase in employee and self-employed PRSI from 4.1% to 4.2% and employer PRSI from 11.15% to 11.25% has taken effect from 1 October 2025.

Amendments have been made to increase the 2% USC rate band from €27,382 to €28,700 and to extend until the end of 2027 reduced USC rates for medical card holders with earnings less than €60,000.

The following income tax reliefs have been extended or enhanced:

Rent Tax Credit & income tax exemption

Extension of the current Rent Tax Credit and an income tax exemption on up to €400 on the sale of micro-generated electricity until the end of 2028.
Mortgage interest relief

Extension on a tapered basis of mortgage interest relief on primary private residences until the end of 2026.
BIK relief for electric cars

Extension of the employee BIK relief for electric (zero emission) cars until 2029.
Special assignee relief programme scheme

Extension of the Special assignee relief programme (SARP) scheme for five years and qualifying level increased to €125,000 (previously €100,000).
Key employee engagement programme scheme

Extension of the Key employee engagement programme (KEEP) scheme until the end of 2028.
Foreign earnings reduction scheme

Extension of the Foreign earnings deduction (FED) scheme for five years with an increase in the level of relief to €50,000.

A scheme of pension auto enrolment, which was legislated for previously, is due to come into effect on 1 January 2026 and with different tax implications to existing employer pension schemes, including a matching of 1.5% of employer and employee contributions.

Extension of various farming related tax reliefs including: (i) stamp duty relief on farm consolidation, (ii) accelerated capital allowances for slurry storage equipment, (iii) Capital Gains Tax relief on farm restructuring and (iv) young-trained farmers stamp duty relief.

A reduction in the rate of tax on certain Irish investment and life assurance funds, equivalent offshore funds and foreign life assurance products from 41% to 38%. A corresponding rate change has been made to Investment Undertaking Tax. Commitment to a simplified future tax framework for retail (individual) investors in such funds.

An increase in the lifetime limit for chargeable gains qualifying for entrepreneur relief (tax rate of 10%) increased from €1m to €1.5m.

Business Taxation

Enhancements to the Research and Development (R&D) regime including an increase in the credit available from 30% to 35%, an increase in the first-year payment threshold to €87,500 and an administrative simplification measure on the level of inclusion of employee costs.

Enhancements to the participation exemption for foreign dividends, including broadening the scope to include dividends paid from countries that apply a non-refundable dividend withholding tax and a reduction in the period of time a subsidiary must be resident in a relevant territory from five to three years. Certain other technical clarifications have been made.

Amendments to the Film Tax Credit to reflect a new 40% rate for productions with a minimum of €1 million of eligible expenditure on relevant Visual Effects expenditure up to a maximum of €10 million per production. Extension of the Digital Games Tax Credit to 31 December 2031 and enhancements to allow for claims in respect of certain post-release content work. These amendments are both subject to a commencement order, pending approval from the European Commission.

Introduction of a new exemption from 1% stamp duty on the acquisition of shares in Irish companies admitted for trading on certain regulated markets where the company has a market capitalisation of below €1 billion.

Extension of the accelerated capital allowances schemes for both energy efficient equipment and gas vehicles and refuelling equipment to 31 December 2030.

Extension of the Bank Levy until the 31 December 2026.The levy is expected to continue to raise €200 million.

A technical amendment is to be made from 7 October in respect of relief for capital allowances on qualifying Intellectual Property (IP) providing that the utilisation of balancing allowances on such IP will be subject to the existing 80% usage restriction which applies to capital allowances and related interest.

Property

An enhanced corporation tax deduction is being introduced of 125% of qualifying apartment construction costs up to a maximum of €50,000 per apartment unit. This deduction will be claimable at completion by a developer in respect of new build and conversion projections comprising 10 or more units where a commencement order is submitted on or after 8 October and before 31 December 2030.

The Living City Initiative which supports regeneration in certain designated areas is being extended to 31 December 2030 and the relief increased from €200,000 to €300,000. The scheme is also being extended to cover certain residential properties built before 1975 and the conversion of certain commercial property and “over the shop” premises.

A new Derelict Property Tax (DPT) is to be introduced expected to be effective from 2027 to replace the existing Derelict Sites Levy (DSL). It is expected that the rate of the DPT will not be lower than the existing 7% DSL rate.

Extension of the stamp duty refund scheme which provides for the partial repayment of stamp duty paid in respect of land which is subsequently developed for residential purposes until 31 December 2030 and a number of enhancements are made, including allowing refunds for multi-phase developments at the commencement of the first phase.

Extension of income tax relief for retrofitting by landlords to 31 December 2028 and the number of qualifying properties increased from two to three.

A public consultation is being commenced on proposals to simplify the Irish Real Estate Fund (IREF) regime.

A opportunity is being provided for landowners to avail of an exemption from Residential Zoned Land Tax for 2026 where a change in land zoning is sought. Other changes are being introduced to improve the operation of the Residential Zoned Land Tax.

A new corporation tax exemption is being introduced for rental profits which arise from homes that fall within the Cost Rental Scheme.

Indirect Tax

The VAT rate applicable to the sale of new apartments will be reduced from 13.5% to 9% effective from 8 October 2025 up to 31 December 2030.

Reduction in VAT rate applicable to food and catering services as well as hairdressing services from 13.5% to 9% with effect from 1 July 2026.

Temporary 9% VAT rate currently applicable to supplies of gas and electricity is extended (by financial resolution on 7 October) up to 31 December 2030.

Excise duty on a packet of 20 cigarettes to be increased by €0.50 (including VAT) with a pro-rata increase on other tobacco products from midnight on 7 October. A tax on e-cigarettes and vaping products (€0.50 per milliliter of e-liquid) will commence from 1 November 2025.

Carbon tax to increase to €71 t/CO2 emitted from 8 October 2025 for auto fuels, with a delayed commencement until 1 May 2026 for all other affected fuels.

Electronic invoicing to be introduced on a phased in basis in relation to certain “Business to Business” transactions with further details to be published on October 8.

Extension of €5,000 VRT relief for electric vehicles extended to 31 December 2026.

A targeted duty on Pool Betting to be introduced in Budget 2027 subject to engagement with relevant stakeholders.

Flat-rate addition for farmers who opt not to register for VAT to decrease from 5.1% to 4.5% from 1 January 2026.

Get in touch

The measures unveiled in Budget 2026 will have far-reaching implications for businesses across Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.

Contact Orla Gavin of our Tax team today.