Following the delivery of Budget 2026 yesterday, here is a quick analysis of the proposals that will directly affect your business strategy, operational costs, and investment planning over the coming year.
Overall, the budget focuses heavily on targeted reliefs for specific sectors, support for innovation, and measures addressing the cost of living.
Here is a summary of the most important measures for business owners:
1. Enhanced Incentives for Investment and Entrepreneurship
- Research & Development (R&D) Tax Credit: This credit has been significantly enhanced, increasing the rate from 30% to 35%. The threshold for first-year refunds under the R&D tax credit scheme will increase to €87,500 to support smaller projects.
- Capital Gains Tax Revised Entrepreneur Relief: which provides for a reduced rate of Capital Gains Tax of 10% on gains of up to €1 million, over a lifetime, arising from the disposal of qualifying business assets. This lifetime limit on which relief can be claimed is being increased to €1.5 million from 1st January 2026.
- Accelerated Capital Allowances: The scheme for energy-efficient equipment has been extended, encouraging investment in sustainable and energy-saving technology.
2. Business Operational Costs
- Minimum Wage Increase: The national minimum wage is set to increase by 65 cents to €14.15 per hour. This will directly impact payroll costs across all sectors and should be factored into 2026 financial forecasting.
- VAT Reductions: A targeted VAT reduction (from 13.5% to 9%) was announced for the Hospitality Sector (food, catering, and hairdressing), taking effect from July 2026. Separately, the VAT rate on new apartment construction is also being reduced to boost housing supply.
- Carbon Tax: will increase by €7.50 per tonne of carbon dioxide to €71. This will apply to auto fuels immediately, and to all other fuels on 1 May 2026. The Programme for Government 2020 committed to increasing the carbon tax on fossil fuels from €26 per tonne of carbon dioxide to €100 per tonne by 2030. The Finance Act 2020 legislated for annual increases to the carbon tax of €7.50 per tonne up until 2029, and €6.50 in 2030.
3. Employee and Personal Measures
- Personal income tax bands and credits were left unchanged.
- The Rent Tax Credit (RTC) is being extended by a further three years, to 31st December 2028. The value for 2026 and subsequent years will be a maximum of €1,000 per single individual and €2,000 per jointly assessed couple.
- The Mortgage Interest Tax Relief is being extended, on a tapered basis, for two further years, to 31st December 2026. Homeowners with an outstanding mortgage balance between €80,000 and €500,000 as of 31st December 2022 will be eligible. The current level of relief will be maintained for the increase in interest paid in the tax year 2025 over 2022, with a maximum tax credit of €1,250 per property available. This relief can be claimed by taxpayers from 2026. A reduced level of relief will be available for the increase in interest paid in the tax year 2026 over 2022, with a maximum tax credit of €625 per property applicable. This relief can be claimed by taxpayers from 2027.
4. Savings and Investments
Reduction in Exit Tax: The tax rate on payments made from Irish funds and equivalent offshore funds to Irish individual investors (known as Exit Tax or Investment Undertaking Tax – IUT) has been reduced from 41% to 38%. The effective implementation date remains unclear; it may be January 1st, 2026, or earlier with the passing of the finance bill.
Feel free to contact Joanne at any time on 01 5267770 or 053 9110380.
