Budget 2026

The Government announced measures to reduce construction costs and boost housing supply, especially for apartments. These initiatives are expected to be seen as beneficial to the construction sector and aid in addressing high apartment construction costs. However, concerns remain about their effectiveness amid ongoing planning system issues.

Additionally, the Minister clarified that Irish real estate funds (IREFs) won’t face entity-level tax, addressing investor uncertainty. A public consultation will explore simplifying the regime without limiting its effectiveness.

Key measures:

• An exemption from corporation tax for rental income arising from properties in the Cost Rental Scheme, effective from 8 October 2025.
• An enhanced corporation tax deduction for certain construction costs incurred on both new apartment development and the conversion of non-residential property into apartments.
• A reduction of the VAT rate on the sale of completed apartments from 13.5% to 9% with effect from 8 October 2025.
• Several amendments to the Living City Initiative, which provides tax relief on refurbishment expenditure incurred on buildings in designated “special regeneration areas”, including an extension of its duration and an increase in the total expenditure on which relief can be claimed.
• The replacement of the Derelict Site Levy (currently 7% of the market value of the site) with a new Derelict Property Tax. The rate is not envisaged to be lower than 7%.  
• An extension to the income tax deduction for landlords retrofitting for a further three years to 31 December 2028. 
• In 2026, landowners may avail of an exemption from Residential Zoned Land Tax (RZLT) ) if they seek to have their land rezoned to reflect genuine economic activity being carried out.
• An exemption from RZLT during An Coimisiún Pleanála proceedings brought by a third--party in relation to a grant of planning permission in respect of a relevant site.
• The Residential Development Refund Scheme, which provides for a refund of 11/15 of the stamp duty paid on a purchase of land that is subsequently developed as residential property, is to be extended to 31 December 2030.

Budget 2026 did not feature broad income tax changes. Instead, it provided more targeted relief for specific costs with an extension to some important reliefs.

Key measures:

• Changes in the USC, increasing the ceiling of the 2% rate by €1,318 to €28,700. This ensures that full-time workers on minimum wage remain outside the top rate of USC and receive a modest benefit. The USC concession for individuals with a full medical card and income of less than €60,000 has been extended to 2027.
• The Rent Tax Credit has been extended for three years to the end of 2028. The amount of credit remains unchanged at €1,000 per person.
• Mortgage Interest Relief has been extended for a further two years (2025 and 2026) with a reduced value applying in the final year (2026).
• There is an increase to the minimum wage, adding 65 cent per hour to bring it to €14.15 per hour.
• The Special Assignee Relief Programme (SARP) has been extended for a further five years, with an increase to the minimum income threshold to €125,000 from 2026. 
• Foreign Earnings Deduction (FED) relief has been increased to €50,000 from 2026, extended for a further five years and the scope has been widened to include Philippines and Turkey.
• €10,000 company car benefit-in-kind (BIK) relief has been extended by one year. It will then reduce to €5,000 in 2027 and €2,500 in 2028, being abolished from 2029. A new vehicle category for zero emission cars will apply with BIK rates of between 6-15% from 2026. From 1 January 2026, the lower threshold of the highest mileage band for company car BIK will be permanently reduced from 52,001km to 48,001km.

We welcome the Budget’s enhancements to Ireland’s research and development (R&D) incentives, including the increase in the R&D tax credit to 35%, the extension of the Digital Gaming Tax Credit by six years, and consideration of broader innovation supports. These are positive steps for competitiveness, but further work is required on scope, timing and design to ensure Ireland remains best‑in‑class and maximises investment across pharmaceuticals, life sciences, technology and gaming.

Key measures include:

• R&D tax credit rate to increase from 30% to 35%.
• First‑year payment minimum threshold to increase from €75,000 to €87,500 to support smaller R&D claims.
• An administrative simplification measure to allow 100% of an R&D employee’s emoluments as qualifying costs where at least 95% of their time is spent on qualifying R&D activities.
• Publication of a R&D compass in the coming weeks to consider targeted changes (e.g. outsourcing and qualifying expenditure definitions) and to set a pathway for the development of innovation supports.
• Extension of the digital games tax credit by six years and eligibility expanded to include certain post‑release activities (subject to conditions).

Budget 2026 delivered some beneficial measures that will hopefully further support businesses as they deal with both market uncertainty and the constant challenge of trying to remain competitive. The measures announced for private Irish businesses had a clear focus on supporting certain key sectors with the goal of protecting jobs.

Key measures include:

• A reduced 9% VAT rate for food and catering businesses, as well has as hairdressing services. However, the reduction will not come into effect until 1 July 2026.
• Increases to the overall lifetime limit available on gains that qualify for Revised Entrepreneur Relief. This will apply in respect of qualifying disposals made on or after 1 January 2026 and sees the limit increase from €1m to €1.5m.
• The Key Employee Engagement Programme (KEEP), which was due to expire at the end of 2025 and is seen as essential in helping smaller businesses incentivise key employees, is to be extended until the end of 2028.
• There has been an extension to the Accelerated Capital Allowances schemes for energy efficient equipment until 31 December 2030.
• The Section 481 Film Tax Credit has been enhanced to provide a new 40% rate for productions with a minimum of €1m of eligible expenditure on relevant visual effects work.

Budget 2026 and the National Development Plan allocated much-needed funding to support Ireland’s energy transition and the development of the circular economy. However, it was disappointing that more tax measures were not introduced to support further private investment into renewable energy deployment, wider energy efficiency measures and circular economy practices. Additional tax measures would be consistent with proposals at EU level under the Clean Industrial Deal.

Key measures:

• A reduced 9% VAT rate on gas and electricity, which is due to expire on 1 November 2025. A financial resolution will be introduced on Budget night to extend the measure until 31 December 2030.
• The €5,000 vehicle registration tax (VRT) relief for electric vehicles has been extended until 31 December 2026.
• Funding of €1.1bn has been allocated to this area, including €209m to support climate action and environmental leadership and €724m to support energy transformation.
• Additional transfers into the Future Ireland Fund and the Infrastructure, Climate and Nature Fund to bring the balance to €24 million at the end of 2026 with a target of €40 billion at the end of the term of this Government.
• The additional revenue arising from the carbon tax increase is estimated at €121 million in 2026. The carbon tax will increase from €63.50 to €71 per tonne of CO_2, applying to auto-fuels such as petrol and auto-diesel from 8 October 2025 and to other fuels from 1 May 2026.
• Households that sell electricity back to the grid from micro-generation do not have to pay income tax on the first €400 they earn each year. This tax exemption has now been extended for three more years, until the end of 2028.

Budget 2026 focused on boosting Ireland’s competitiveness and contained some encouraging measures for foreign direct investment (FDI) and the financial services industry. However, it is disappointing that the announcements with respect to the participation exemption regime only included marginal changes to geographic scope and were notably silent on the introduction of a foreign branch participation exemption.

Key measures:

• The rules for the participation exemption for foreign dividends will be updated and enhanced by way of expanding geographic scope of the exemption to include jurisdictions where non-refundable withholding taxes apply. A number of technical amendments will also be provided for to improve the operation of the relief, including confirmation that a shareholding should not be considered a “business” for the purposes of the provisions.
• The Minister published an action plan for the reform of Ireland’s taxation regime for interest, to ensure that Ireland’s tax code is attractive to investment and is aligned with international best practice. A feedback statement will be issued in November 2025 to invite further consultation, with changes anticipated to be made in Finance Bill 2026.
• The Minister announced that the tax rate on payments made from Irish funds and equivalent offshore funds to Irish individual investors (i.e. exit tax) will be lowered from 41% to 38%.
• The Minister will publish a roadmap early next year setting out an intended approach to improve retail participation in investment funds, taking into account the European Commission’s savings and investments union proposal last week for the introduction of tax-efficient investment accounts.
• A joint Department of Finance and Revenue public consultation on withholding taxes is expected to be launched soon.

In contrast to last year’s pre-election budget, this year’s budget focused on the future to secure jobs, prosperity and stability. The budget was a restrained and pro-business package. The Government prioritised a range of measures to drive economic growth and investment for businesses, and significant capital funding for new infrastructure.

The headline measures were the reductions in VAT in hospitality and apartment sales as well as the increase to the R&D tax credit.

We await the release of the Finance Bill on 16 October 2025 to see the detail around a number of the initiatives announced. We continue to push for simplification measures and hope that some of these may be addressed as part of this.