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      Key measures

      As had been expected, there were minimal changes to personal taxes in Budget 2026. The key discussion points and measures introduced by the minister relating to personal taxation were as follows: 


      • Income tax & USC

        There was no change in income tax or USC rate bands to adjust for recent wage growth. 

      • Minimum wage

        The minister announced that the minimum wage will increase to €14.15 per hour from 1 January 2026. In keeping with prior years, the minister announced a corresponding increase to the ceiling on the second rate of USC (2%) to ensure that workers on the new minimum wage do not see the benefit eroded by higher rates of USC. The new upper limit for the 2% rate will be €28,700, an increase of €1,318. 

      • Medical card holders

        The concession applying reduced USC for qualifying medical card holders is being extended until 31 December 2027.

      • PRSI

        The minister did not announce any reversal of pre-planned 0.15% increases in the rate of employee PRSI and employer PRSI, so these increases will still become effective in October 2026.

      • Rental Tax Credit

        The minister announced the extension of the Rental Tax Credit to 31 December 2028 and Mortgage Interest Relief until 31 December 2026. However, the maximum credit allowed for Mortgage Interest Relief will remain at current levels for 2025 but will reduce by 50% for 2026. 

      • Investments

        The tax rate is being reduced from 41% to 38% on certain investments (including ETFs, certain offshore funds, ICAVs, Authorised Investment Companies and Unit Trusts) and certain Life Assurance Policies. Further detail on same will be included in the Finance Bill.

      • Revised Entrepreneur Relief

        The lifetime limit on gains qualifying for the 10% rate of capital gains tax on qualifying business assets under Revised Entrepreneur Relief is being increased from €1 million to €1.5 million. This is to apply to disposals after 1 January 2026. 

      Cian Liddy

      Partner

      KPMG in Ireland


      KPMG insights – our view

      It had been well-signalled by the minister in advance that there would be minimal changes to personal taxation in Budget 2026.

      One of the most significant decisions by the minister was not to provide for a general increase in the tax rate bands and/or credits. According to the CSO, the average weekly wage in Ireland increased by over 5% in the 12 months to Q2 2025.

      The impact of growing average wages alongside status quo tax rate bands will mean that more taxpayers are paying income tax at the higher rate (seeing their effective tax rate increase) and fewer taxpayers are exempt from income tax.

      Indeed, the increase in the USC upper band for the 2% threshold by €1,318 is the only general measure that will provide a (relatively small) benefit for taxpayers earning above the current ceiling of €27,382.

      This increase in effective real tax rate will be compounded by increases to PRSI rates – an increase of 0.1% has commenced this month and a further increase of 0.15% will apply from 1 October 2026.


      Mortgage interest relief & rental tax credit


      The extension of the rental tax credit and mortgage interest relief will provide some relief for certain taxpayers. However, the extension comes with a caveat that relief for mortgage interest payable in 2026 will be half that available for mortgage interest payable in 2025.  This is somewhat surprising given the Government’s focus on making housing more affordable.


      Investments


      The tax treatment of returns from certain investment products attracted significant media attention in advance of the budget, and the minister had signalled that the concerns raised by investors and the financial service industry alike were being heard.

      The announced reduction from 41% to 38% in the applicable rate of tax on those investments products is a step in the right direction, however there are still various other measures that we believe should be implemented to simplify the taxation of such investments as set out in our pre-Budget submission.

      In this regard, the minister confirmed his intention to publish a roadmap early in 2026 to set out his intended approach to simplify and adapt the tax framework to encourage retail investment (referencing recommendations from the European Commission on Savings and Investment Accounts).

      It is to be hoped that the roadmap will address such issues as aligning the tax rate with the 33% capital gains tax applicable to other investments, removing the deemed disposal rule that taxes unrealised profits, and providing for relief for losses incurred by investors.


      Encouraging entrepreneurs


      In a time of global uncertainty, it is very important that we encourage entrepreneurs to start and grow businesses in Ireland. The Budget included an increase to the lifetime limit of Revised Entrepreneurs Relief from €1 million to €1.5 million.

      The incremental benefit for each qualifying entrepreneur accessing a 10% rate of capital gains tax could be worth up to €115,000. This is an important signal to our indigenous entrepreneurs, but considering the additional jobs and economic activity that these new businesses create, we believe there is more to be done in this area to ensure that our tax system does not create a perverse incentive to sell a business rather than growing it to one of scale.

      Overall, while Budget 2026 introduces some welcome targeted tax changes, continued reform in forthcoming budgets will be essential. 


      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 Cian Liddy of our Tax team today. 

      Cian Liddy

      Partner

      KPMG in Ireland

      Expert tax services for businesses & individuals operating in Ireland & internationally