Budget 2026: Commentary and analysis

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Progress vs prudence: Government attempts balancing act

Against a backdrop of tariff tensions, geopolitical instability, and diverging growth paths across major economies, this year’s Budget arrives at a time when, as Minister for Finance Paschal Donohoe noted, uncertainty is the defining feature of the global landscape.

While the strong fundamentals of record employment and a persistent corporate tax surplus provide fiscal comfort, persistent warnings about the dangers of over-reliance on volatile corporate tax receipts frame this as a moment for restraint.

Rather than repeating previous giveaways, the Government has opted for a long-term approach, emphasising investment, infrastructure, and enterprise while signalling fiscal discipline. It shows a clear commitment to housing delivery, business competitiveness, and sustainable public investment.

Housing as the Budget’s centre of gravity

The 9% VAT rate cut for new completed apartments, effective immediately until 31 December 2030, is the Budget’s most consequential housing intervention, aimed at improving development viability amid rising construction and financing costs.

Together with an expanded Living City Initiative, the measure forms part of a broader package designed to increase investment and unlock supply.

A wider set of initiatives includes extensions to stamp duty refunds and the introduction of a new Derelict Property Tax, both aimed at stimulating residential development.

To boost affordable housing supply, a corporation tax exemption will apply to rental profits from Cost Rental Scheme homes from 8 October 2025. In parallel, developers can claim an enhanced deduction on qualifying costs for building or converting apartments — targeted relief to offset rising construction costs.

Leveraging indirect tax to unlock supply is smart policy. But tax measures alone won’t build homes. A joined-up delivery model will.

Emma Broderick Head of Indirect Tax

Enterprise: Stability, simplification and sector support

The 9% VAT rate for food, catering and hairdressing will help protect employment and business viability, but delayed implementation until July 2026 blunts the short-term benefit. For sectors already facing high inflation, new sick-pay costs and pension auto-enrolment, nine months is a long wait.

The Budget also sought to reinforce Ireland’s reputation as a knowledge and enterprise economy through selective, pro-competitiveness measures.

The R&D tax credit rises from 30% to 35%, enhancing Ireland’s position for both FDI and indigenous innovation. This also mitigates the impact of recent US tax changes that disincentivise R&D activity outside the US.

The SARP (Special Assignee Relief Programme) has been extended — a positive for international mobility — though the higher minimum salary threshold is a disappointment. The forthcoming Finance Bill is expected to simplify access to the relief, a long-standing business request.

The increase in the Capital Gains Tax Entrepreneur Relief lifetime limit to €1.5 million from 1 January 2026 was a welcome surprise. Entrepreneurs disposing of qualifying business assets can now avail of a 10% CGT rate up to that threshold — a potential saving of €345,000, compared with the standard 33% rate.

This further enhances Ireland’s reputation as a knowledge economy. It also mitigates some of the adverse impacts of recent US tax changes aimed at disincentivising R&D carried out outside of the US. There is the promise of further reform in the Finance Bill.

Peter Vale Partner - Head of Tax (ROI)

Income tax: A year of standing still

Aside from limited USC relief for those on the National Minimum Wage, there were no income-tax enhancements. As tax bands remain unindexed, many workers will see a stealth increase in their tax burden.

Still, there are targeted supports. Most core welfare payments will rise by around €10 per week; the 9% VAT rate on electricity and gas is extended to 31 December 2030; and the minimum wage will increase from 1 January 2026. The €500 permanent cut to third-level student fees, to €2,500, will be widely welcomed, as will continued childcare fee caps and expansion of places in high-cost areas. Mortgage-interest relief and the rent tax credit are both extended but not enhanced, providing continuity rather than additional benefit.

Our calculations show that, excluding child benefit, a dual-income couple with two children earning €45,000 each was €1,850 better off last year; this year, they are €75 worse off.

Sarah Meredith Partner - Tax

A budget of missed opportunities for financial services

From a financial services perspective, a reduction in the exit tax rates for Irish and offshore funds, Exchange Traded Funds and life assurance policies is welcome, but a 38% rate is still higher than other withholding rates.

Despite an increase in the R&D Tax Credits, additional simplification and application of R&D Tax Credits and their application to the FS & FinTech sectors would have been welcome, particularly at a time when protecting and enhancing our international competitiveness in these sectors is required.

One recommendation that the Minister for Finance has confirmed will not be progressed is the recommendation for a consultation on an entity-level tax for Irish Real Estate Funds (IREFs). However, the Minister intends to hold a public consultation in 2026 on proposals to simplify the IREF regime.

The devil will be in the details of the Finance Bill 2026. Careful consideration of the Retail Investment Roadmap (to simplify and modernise the tax framework to encourage broader retail participation in investment markets) and the Implementation Plan for the overall Funds Sector 2030 Report will be needed. Another year has passed without a Branch participation exemption, and it will be interesting to see if this issue will be addressed in the implementation plan.

Budget 2026 appears to be a missed opportunity and yet again the FS and FinTech sectors have to await the outcome of a number of new consultations, feedback statements and implementation plans in relation to the taxation of interest and withholding tax.

Brian Murphy Partner - Financial Services Tax