The Minister for Finance, Paschal Donohoe, and the Minister for Public Expenditure and Reform, Jack Chambers, presented the first Budget of the coalition Government on Tuesday October 7.
The Budget 2026 measures announced are aimed at investing in the future, supporting the delivery of housing, and securing Ireland’s competitiveness and economic resilience.
An overview of the key measures announced are set out below.
Household tax measures
There are two changes to the Universal Social Charge (“USC” ):
An increase in the entry threshold to the second-rate band from €27,382 to €28,700 in line with the €0.65 per hour increase in the minimum wage (rising to €14.15 per hour ).
An extension in the USC concession that applies to those who have a full medical card and earn less than €60,000 per year for a further two years until the end of 2027.
The Rent Tax Credit of €1,000 for single persons and €2,000 for jointly assessed couples has been extended for a further three years until the end of 2028.
Mortgage Interest Tax Relief has been extended on a tapered basis for two further years.
The reduced VAT rate of 9% on gas and electricity bills will be extended until 31 December 2030, with a financial resolution introduced on Budget night.
The tax rate applying to Irish and equivalent offshore funds and foreign life assurance products will be reduced from 41% to 38%.
Housing
The VAT rate applied to the construction of new apartments will be reduced from 13.5% to 9%, effective from 8 October 2025 until 31 December 2030.
A corporation tax exemption is being introduced in respect of rental profits arising from homes that fall within the Cost Rental Scheme.
An enhanced corporation tax deduction is being introduced for certain costs incurred on the construction of apartment developments, and for the conversion of non-residential buildings into apartments.
The Living City Initiative has been expanded and extended to the end of 2030 and the scope of buildings within the initiative includes those built before 1975.
A new Derelict Property Tax has been announced which will replace the Derelict Sites Levy currently charged at a rate of 7% on the site market value.
The Residential Development Stamp Duty Refund Scheme has been amended to bring it in line with current planning and development practices and has been extended until the end of 2030.
The Income Tax deduction for small landlords who retrofit their properties has been extended for a further three years to 31 December 2028.
Business tax incentives
The VAT rate on food and catering businesses and for hairdressing services will reduce from 13.5% to 9% with effect from 1 July 2026.
There are several enhancements to the Research and Development (“R&D” ) Tax Credit regime, including:
An increase in the rate of the credit from 30% to 35%.
An increase in the first-year payment threshold from €75,000 to €87,500.
The dividend participation exemption rules will be updated and enhanced by expanding the geographic scope to include jurisdictions where non-refundable withholding taxes apply and by providing several technical amendments to improve the operation of the relief.
The Digital Games Tax Credit has been extended for a further six years and is enhanced to allow for claims in respect of post-release content work.
The Film Tax Credit has been enhanced to provide a new 40% rate for productions with a minimum of €1 million of eligible expenditure.
The lifetime limit on gains to which the Capital Gains Tax Revised Entrepreneur Relief applies has been increased from €1 million to €1.5 million for disposals made from 1 January 2026.
The Key Employee Engagement Programme (“KEEP” ) is extended to 31 December 2028, subject to approval from the European Commission.
The Special Assignee Relief Programme (“SARP” ) has been extended for a further five years and is amended to increase the minimum qualifying income to €125,000.
The Foreign Earnings Deduction (“FED” ) has been extended for a further five years. The level of relief available will increase to €50,000 and the scheme will extend to include the Philippines and Türkiye.
A new exemption from the 1% Stamp Duty on the acquisition of shares has been introduced. The exemption will apply to shares in Irish-registered companies traded on regulated markets and have a market capitalisation of below €1 billion.
Agricultural sector
The Accelerated Capital Allowances Scheme for slurry storage facilities has been extended for a further four years.
The Farm Consolidation (Stamp Duty ) relief, Farm Restructuring (Capital Gains Tax ) relief and the Young Trained Farmer (Stamp Duty ) reliefs have been extended to 31 December 2029. The Farm Restructuring relief has also been broadened to cover woodlands and forestry.
Climate
There has been an increase in the rate of carbon tax from €63.50 to €71 per tonne. The increase will apply to petrol and diesel from 8 October 2025.
The VRT relief for electric vehicles has been extended for one further year to 31 December 2026.
In relation to the BIK regime for company cars, the temporary universal relief to the Original Market Value (“OMV” ) will be extended on a tapered basis for further three years.
The BIK rates for employer-provided cars will be amended to incorporate a new category for vehicles with zero emissions which will be based on the lowest BIK rates.
The Accelerated Capital Allowances schemes for energy efficient equipment and for gas vehicles and refuelling equipment have been extended for a further five years.
The exemption of up to €400 from Income Tax for certain profits arising from the micro-generation of electricity has been extended for a further three years.
Social welfare and related measures
There will be an increase of €10 in Social Protection payments.
The Working Family Payment income thresholds will increase by €60 per week for all families.
The Child Support Payment will increase by €8 per week for under 12s and €16 per week for over 12.
The rate of Domiciliary Care Allowance will be increased by €20 per month.
The Carer’s Allowance income disregard will be increased to €1,000 for a single person and €2,000 for a couple.
The Fuel Allowance rate will increase by €5 to €38.
The recipients of long-term social welfare schemes will be paid a Christmas bonus of 100% of the normal weekly payment.
The back-to-school clothing and footwear payment has been extended to two- and three-year olds.
There will be a permanent reduction in the student contribution fee of €500.
Other
The excise duty on a packet of 20 cigarettes will be increased by €0.50, with a pro-rata increase on other tobacco products.
This article was compiled by Eibhlin Nic Dhonnacha and Darren Dooley of KPMG, Dockgate, Dock Road, Galway. Tel: 091-534600. For further information on Budget 2026 visit kpmg.ie/budget2026