Budget 2027

A significant development in Budget 2027 was the confirmation of the framework for the new investment account, an initiative intended to provide individuals with a simplified, tax-advantaged route to investing.

Key measures:

• Individuals may contribute up to €12,000 to an investment account each year. There is no minimum contribution.
• The investment account will allow individuals to invest tax-free in an account with a value of up to €50,000. No tax will be payable on balances below this threshold. Account value above the threshold will be subject to an annual 1% tax charge.
• The product provider will handle the tax calculation and reporting, simplifying the process for account holders.
• There is no minimum investment period. Funds may be withdrawn at any time without triggering a tax payment or penalty.
• The investment account will offer access to a diversified range of investments, including shares, bonds, investment funds, and opportunities to invest in the EU economy, while excluding highly risky or complex products. Investment account holders will not be able to invest in cash other than using cash for transactional purposes.
• No Capital Gains Tax (CGT), Dividend Witholding Tax (DWT) or other similar taxes will apply to the accounts.
• Investment accounts will be available from 1 July 2027. A broad range of providers, including banks, investment managers, insurers, and others, are expected to offer accounts, supporting competition and innovation in the market.  

Budget 2027 includes a number of measures to ease the income tax burden on workers. While these measures will deliver tax savings for most taxpayers, their overall impact is tempered by further Pay Related Social Insurance (PRSI) increases and the expiry of certain temporary cost-of-living reliefs.

Key measures:

• The standard rate band has increased by €2,500, bringing the 20% band cut-off point to €46,500.
• The change in the Universal Social Charge (USC) increases the ceiling of the 2% rate by €1,600 to €30,300 to ensure that full-time workers on minimum wage remain outside the top rate of USC and give a modest benefit.
• The Personal Tax Credit, Employee Tax Credit, and Earned Income Tax Credit have each increased by €125. The Home Carer Tax Credit has increased by €100.
• The Rent Tax Credit has increased by €150, resulting in a total credit of €1,150 per person, or €2,300 for a married couple.
• The National Minimum Wage has increased by €0.79 per hour to €14.94 per hour.
• Childcare supports will be increased in September 2027, with the aim of reducing the cost of childcare by €2,220 per child per year. Childcare Services Relief will also increase.
• The threshold for tax relief for qualifying tuition fees for approved third-level courses has decreased.
• Increase in social welfare payments by €10 per week.
• The Capital Acquisitions Tax (CAT) thresholds have increased. The Group A threshold has increased from €400,000 to €420,000, the Group B threshold has increased from €40,000 to €44,000, and the Group C threshold has increased from €20,000 to €22,000.

Budget 2027 includes a number of targeted business tax measures. While no significant changes to the overall corporate tax framework have been introduced, the announcements include a range of technical and policy updates relevant to businesses operating in Ireland.

Key measures:

• The CGT rate will fall from 33% to 31% from 7 October 2026. The separate 33% CGT rate applying to disposals of development land will remain unchanged.
• The Ireland Strategic Investment Fund (ISIF) is launching a €1 billion investment programme to support the growth and scaling of Irish businesses.
• The OECD Pillar Two Side-by-Side package will be incorporated into Irish legislation in this year's Finance Bill. Agreed by the OECD Inclusive Framework earlier this year, the package simplifies the application of the Pillar Two rules for in-scope groups. It includes a one-year extension of the Transitional CbCR Safe Harbour and introduces the Simplified ETR Safe Harbour, the Substance-based Tax Incentive Safe Harbour, the Side-by-Side Safe Harbour, and the Ultimate Parent Entity Safe Harbour.
• Several targeted technical changes will somewhat simplify existing interest deductibility provisions for certain lending and investment activities. These changes will be included in the Finance Bill.
• The tax rate on payments to Irish individual investors from Irish funds, equivalent offshore funds, and life assurance policies will fall from 38% to 35%.
• The preliminary corporation tax rules will be amended, including an increase from €200,000 to €350,000 in the threshold used to determine whether a company is regarded as a small company.
• Relief from tax for certain start-up companies will be extended to 31 December 2030.
• Employers will be able to choose between the current Real Time Reporting model and monthly reporting.
• The Employment Investment Incentive (EII), Start-Up Capital (SCI), and Start-Up Relief for Entrepreneurs (SURE) incentives, originally due to expire at the end of 2026, are to be extended, subject to their compliance with EU state aid rules expected to come into force from 1 January 2027.
• The bank levy will continue for another year, until the end of 2027.
• The Knowledge Development Box (KDB) regime will be extended for a further five years, with an option for existing participants to opt out of the regime in respect of all qualifying assets.
• Professional Services Withholding Tax will be reformed through the introduction of personalised withholding tax rates in place of the existing flat 20% rate.

Energy was a key focus for Budget 2027. The Government faced a three-way challenge: cushioning households and businesses from renewed price volatility, maintaining momentum on the clean-energy transition, and managing the significant Exchequer cost of broad-based support.

Key measures:

• Carbon tax on kerosene and natural gas will be reduced to €48.50 per tonne of CO2 and maintained at that level until 2030. These rates had been legislated to rise to €78.50 per tonne by May 2027 but will instead be reduced to 2023 rates.
• The planned increase in carbon tax on auto-fuels to €78.50 per tonne of CO2 from 14 October has been deferred until 1 May 2027.
• Reduced mineral oil tax rates, which were due to expire in November, will remain in place in full until 28 February 2027. The previous mineral oil tax rates on fuel will be restored in four phases from that date onwards with full restoration by 30 June 2027.
• €5 million from the Climate Action Fund will be allocated to support pre-construction costs for nine district heating projects.
• The income tax, USC, and PRSI exemption for microgeneration income received by households that sell electricity back to the grid will increase from €400 to €600.
• A new €2,000 fossil fuel boiler scrappage scheme will be available from early 2027 for houses built before 2021.
• A new €600 grant will be available for home battery energy storage systems.
• Solar PV and batteries will be offered as standard under the fully funded Warmer Homes scheme.
• Grant aid for heat pumps and solar thermal installations will increase under the Business Energy Upgrades scheme.
• A public consultation has been announced to identify barriers to Sustainable Aviation Fuel (SAF) production and deployment in Ireland.
• The Vehicle Registration Tax (VRT) relief scheme for electric vehicles will be extended to 31 December 2028. However, VRT rates for cars in CO2 emissions bands three to 20 (more than 80 g/km) will increase by 1%.  

The Minister announced a range of measures to support housing and infrastructure delivery and investment in the real estate and construction sectors.

Key measures:

• The maximum refund that first-time buyers can claim under the Help to Buy scheme has increased by €5,000 to €35,000, with effect from 7 October 2026.
• The income tax exemption under Rent-a-Room Relief has increased from €14,000 to €16,000. The relief has also been extended to newly installed designated auxiliary dwellings (such as backyard cabins) that are between 32m² and 45m². The change applies retrospectively from 27 July 2026.
• The Derelict Property Tax announced last year will be included in this year’s Finance Bill. The rate of tax will be 7%. Preliminary registers of dereliction will be published on 1 September 2027. Those included on the registers will have until 30 November 2027 to seek a review of their inclusion. Local authorities will then finalise the registers on 1 March 2028, with the first pay and file deadline arising on 23 June 2028.
• Landowners will have a further opportunity to apply to have the zoning of land changed, provided there is no extant planning permission or current planning application for residential development. The deadline is likely to be 30 April 2027, effectively removing the Residential Zoned Land Tax (RZLT) charge for 2027. There has been no change for forward fund sales, which will continue to give rise to an RZLT clawback in the case of residential development.  

The R&D tax credit has been a cornerstone of Irish tax policy since its introduction. Although today’s announcements don’t signal fundamental changes to the regime, they build on the positive developments of recent years.

Key measures:

• The limit on payments to third-party subcontractors and universities or institutes of higher education will increase to the greater of 20% of a company’s internal qualifying R&D expenditure or €200,000 (up from the current limit of the greater of 15% or €100,000).
• The first-year payment threshold of the R&D tax credit will increase from €87,500 to €105,000.
• Documentation requirements for R&D tax credit purposes will be reduced where a clinical trial is regulated.
• The Minister announced changes to the rules governing how the R&D tax credit can be used to meet a company’s preliminary tax obligations.
• A new provision will allow companies to increase their qualifying R&D costs by 5% of qualifying R&D wage costs. The measure is intended to provide an allowance for additional supporting costs that companies incur but that do not currently qualify for the credit.  

The Minister announced a small number of targeted VAT measures across a range of sectors.

Key measures:

• The Farmer’s Flat Rate Addition (which compensates farmers who opt not to register for VAT incurred on their purchases) will increase from 4.5% to 4.8% from 1 January 2027.
• The VAT rate on non-oral respiratory vaccines for livestock will decrease from 23% to 9%. Oral medicines, including vaccines, for livestock will continue to qualify for the zero rate of VAT.
• The annual cap on the VAT Compensation Scheme for Charities will increase from €10 million to €15 million for 2027. Irish charities can apply for a refund of VAT paid on expenditure, based on the proportion of their total income derived from private funding. If total eligible claims across all Irish charities exceed the cap, refunds are paid on a pro-rata basis.  

Budget 2027 includes targeted customs and excise measures that are expected to generate additional Exchequer revenue through changes to tobacco, vaping, and betting taxes.

Key measures:

• The price of a pack of 20 cigarettes has increased by €1, inclusive of VAT, with a pro-rata increase for all other tobacco products.
• Excise duty on e-liquids has increased by 20 cents per millilitre from 1 January 2027.
• A new Pool Betting Charge of 25% on commissions earned will apply from 1 January 2027, with an exemption for on-course bets.

We’re here to help you

With Budget 2027 behind us, attention now turns to Finance Bill 2026. We’re here to help you navigate the resulting changes and identify new opportunities. Our tax experts can offer strategic advice, provide certainty on your tax position, and help ensure compliance with the latest regulations. Our PwC teams can also provide tailored support to help you leverage budgetary measures for sustainable growth. Trust us to guide you through the complexities of Budget 2027 and help drive your business forward. Contact us today.