Budget 2027 headlines

Income Tax & Capital Acquisitions Tax

The standard income tax rate bands have been increased by €2,500, bringing them to €46,500 for single individuals, €50,500 for Single Person Child Carer Credit claimants, and €55,500 for married couples and civil partners (subject to a cap on the transferable band for two-income couples to the lower of €37,500 or the lower earner’s income).

Amendments have been made to increase the ceiling of the 2% USC rate band by €1,600 from €28,700 to €30,300.

The Personal Tax Credit, Employee Tax Credit and Earned Income Tax Credit have each increased by €125 to €2,125, while the Home Carer Tax Credit has increased by €100 to €2,050.

The income tax exemption for micro-generated electricity has increased from €400 to €600, while the Childcare Services Relief exemption has increased from €15,000 to €20,000, with a removal of the cap on the number of children, subject to regulation.

Rebates of certain third-level fees under the Nurturing Skills Learner Fund will be exempt from Income Tax, USC and PRSI, and the threshold for relief on qualifying third-level tuition fees will be reduced to align with the Student Contribution Fee.

Legislation will be introduced in Finance Bill 2027 to revise the valuation methodology for defined benefit pension entitlements for Standard Fund Threshold purposes from 1 January 2027.

The following changes have been made to the Capital Acquisitions Tax thresholds and will apply to gifts and inheritances taken on or after 7 October 2026:

Group A will increase from €400,000 to €420,000
Group B will increase from €40,000 to €44,000
Group C will increase from €20,000 to €22,000

A new Irish Investment Account is being introduced from 1 July 2027 to simplify retail investment in capital markets. Investments made through the account will be subject to a flat annual tax of 1% on value above a tax-free threshold of €50,000, with a maximum annual contribution of €12,000. These investments will fall outside the scope of other taxes and certain deemed disposal rules.

The annual limit for tax-relieved donations of heritage items will increase from €8 million to €12 million.

Capital Gains Tax

The standard rate of Capital Gains Tax has been reduced from 33% to 31% for disposals made on or after 7 October 2026, with no change to the rate applying to disposals of development land.

The Employment Investment Incentive (EII), Start-Up Capital Incentive (SCI), Start-Up Relief for Entrepreneurs (SURE) and Angel Investor Relief have been extended, subject to the adoption of the new EU General Block Exemption Regulation.

Business Taxation

The tax rate on Irish funds, certain life assurance products, and qualifying offshore funds and ETFs has been reduced from 38% to 35%. Finance Bill 2027 will also align the taxation of investors in Irish funds held through recognised clearing systems.

It was announced there will be further work this year to simplify the existing taxation regime for retail investment and remove barriers to investment.

Enhancements to the R&D tax credit regime are introduced in Budget 2027:

An increase in the subcontracting limits to 20% and €200,000 for institutes of higher education, universities and unconnected third parties.
The first-year payment threshold will increase from €87,500 to €105,000.
Changes to the treatment of the R&D tax credit in the calculation of preliminary corporation tax.
An ability to increase qualifying expenditure by 5% of qualifying R&D payroll costs subject to certain expenditure limits.
Regulated clinical trials may be regarded as satisfying the science test for R&D tax credit purposes. Detailed provisions are expected in the Finance Bill.

The Knowledge Development Box relief has been extended to 1 January 2032, with a time-limited and conditional opt-out available for existing claimants.

The preliminary tax regime has been reformed to allow companies to satisfy their obligations where 80% of the current‑year corporation tax liability is paid by the final preliminary tax date and the balance to reach 100% is paid within four months of the year end.

The current 45% deeming provision, under which an underpayment of the second instalment of preliminary tax can result in a deemed underpayment of the first instalment, has been removed. The “small company” threshold is increased from €200,000 to €350,000.

The relief from tax for certain start-up companies for the initial 5 years of operation is being extended by four years to 31 December 2030.

The Bank Levy has been extended for 2027, targeting a yield of €200 million.

The employer PRSI weekly threshold has increased from €552 to €600 from 1 January 2027. Employers will also be given the option to make Enhanced Reporting Requirements submissions either in real time or on a monthly basis.

A number of farming reliefs are being extended and enhanced, including an increase in the Succession Farm Partnership tax credit from €5,000 to €10,000, the removal of the three-year holding period and an extension of the farm safety equipment capital allowances regime to 31 December 2029, along with additions to the list of eligible equipment.

Finance Bill 2027 will implement the OECD Pillar Two Side-by-Side Package, OECD administrative guidance issued during 2026 and updates to penalty and filing provisions.

Property

Housing measures include an increase in the threshold applying for Rent-a-Room income tax relief from €14,000 to €16,000, an extension of the relief to certain detached accommodation units (installed after 27 July 2026) and an increase in the Rent Tax Credit to €1,150 for single claimants and €2,300 for jointly assessed couples.

The Help to Buy Scheme is being extended from 7 October 2026, with the maximum refund increasing by €5,000 to €35,000.

Landowners will have a further opportunity to obtain a Residential Zoned Land Tax exemption for 2027 where they seek rezoning to reflect the genuine economic activity being carried out.

A new 7% Derelict Property Tax is introduced, with the first filing deadline scheduled for June 2028.

Indirect Tax

Carbon tax on home heating oil and gas is reduced to €48.50 t/CO2 emitted.

Increases on carbon tax in respect of other fuels will be deferred until 2027.

VRT relief for electric vehicles is extended to 31 December 2028. The VRT rate in respect of certain (higher emission) cars has been increased by 1%.

The Enhanced Diesel Rebate Scheme and the reduced NORA levy are both extended until the end of the year.

The annual capped fund for the VAT Compensation Scheme for Charities has been increased from €10m to €15m.

A public consultation is to be held in relation to Sustainable Aviation Fuel (“SAF”).

The VAT rate applicable to the supply of non-oral respiratory vaccines for livestock is reduced to 9%.

The flat-rate addition for farmers who opt not to register for VAT has been increase from 4.5% to 4.8%.

Excise duty on a packet of 20 cigarettes is increased by €1 (including VAT) with a pro-rata increase on other tobacco products. Excise duty on e-cigarettes and vaping products is increased by €0.20 per millilitre of e-liquid.

A targeted duty on certain pool bets introduced at a rate of 25% on the commissions earned.

Engagement is ongoing with the European Commission with a view to establishing a more favourable tax treatment for Hydrotreated Vegetable Oil (“HVO”).

Get in touch

The measures unveiled in Budget 2027 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.