Budget 2027: What we expect

Budget 2027: what we expect

Ireland’s Budget 2027 is set to be unveiled on Tuesday, 6th October 2026. Ireland’s per-capita economic growth ranks in the top decile of advanced economies globally. The public finances are in a strong position, and the budg et surplus is set to outperform official forecasts again this year. Government net debt is down €52bn since 2021. Nonetheless, spending pressures are high, particularly due to energy cost uncertainty stemming from events in the Middle East.

Although much remains unknown, the Government outlined the broad parameters of the Budget in the Summer Economic Statement. Recent political commentary and the publication of the Tax Strategy Group papers also provide some indication of the measures that may be under consideration.

Overall Budget package

The total Budget package is expected to amount to €8.5 billion, comprising:

• €7 billion in additional public spending, of which €5.9 billion is for additional current expenditure and €1.1 billion for additional capital expenditure;
• €1.5 billion in new tax measures.

This represents a smaller overall package than Budget 2026, which amounted to €9.4 billion. The Government has said that Budget 2027 will focus on “rewarding hard work, boosting competitiveness and investing in the future”. It also stated that the budget will be aimed at improving public services, investing in critical infrastructure and strengthening Ireland’s long-term economic resilience in the face of rising external threat.

Here are some of the measures we think will be included in Budget 2027:

Investment taxes

Investment Undertaking Tax (IUT) – no change in Budget 2027:

Budget 2026 reduced the rate applying to Irish investment undertakings, equivalent offshore funds and certain life assurance products from 41% to 38%. This was a welcome first step and received wide support from the industry’s leading players, including Davy.

It was initially understood that this may be the first of a series of cuts to IUT aimed at equalising the rate ultimately with Capital Gains Tax (CGT), although the Roadmap for the Taxation of Retail Investment (the roadmap) has indicated that the ultimate rate of IUT may end up being lower than the current rate but higher than CGT, potentially being at around 35%.

Government initially indicated that this may be considered as part of the Budget 2027 package, although the roadmap later suggested that this will be looked at in future budgets, rather than in Budget 2027.

Deemed Disposal – no change in Budget 2027:

While some reports previously indicated that the eight-year deemed disposal rule was being considered for removal in Budget 2027, the roadmap indicated that this will be looked at in the longer-term, likely Budget 2028 at the earliest.

Under this rule, an investor is deemed to have sold their holding every eight years with the gains on this deemed disposal taxed even though the investor has not received any proceeds.

Davy has previously called for its removal and greater alignment between the taxation of investment funds and investments subject to CGT. We believe a simpler and more consistent regime would encourage households to invest for the long term through appropriately diversified products.

Savings and Investment Accounts – introduced in Budget 2027 based on Swedish and UK models:

The Government is developing a new tax-incentivised account intended to simplify retail investment and allow individuals to grow their savings more efficiently.

The roadmap indicated that this account will be tax-free up to an annual limit with a flat tax on holdings paid for amounts held above the threshold. The exact details of these limits are expected to be announced as part of Budget 2027.

This account considers the recommendations of the Funds Sector Review and the European Commission’s recommendation on Savings and Investment Accounts. The Irish system will take inspiration from multiple account models worldwide such as the Swedish and UK models but will be unique and not directly copied from any one country’s model.

The account will not apply geographic restrictions on investments and will allow investors to invest in a wide range of regulated funds, equities, bond products and Life Company investment products. Investments in the SIA account wrapper will not be subject to IUT or a deemed disposal event every eight years.

It is hoped that the introduction of the new account, combined with other steps towards reforming the existing tax regime for investment funds, will be an important step towards wider participation in investment markets.

Capital taxes

Capital Gains Tax (CGT) – headline rate reduction unlikely:

Earlier this year, Taoiseach Micheál Martin described Ireland’s 33% headline CGT rate as too high and suggested that it was discouraging investment and the reinvestment of proceeds from business sales. This comes on the back of an increased focus across Europe on improving domestic business competitiveness across the union.

However, a headline reduction now appears less likely. The Tax Strategy Group papers conclude that it is difficult to establish whether countries with lower CGT rates enjoy a significant competitive advantage.

A targeted enhancement of Revised Entrepreneur Relief may be more likely. Budget 2026 increased the lifetime amount of qualifying gains taxed at 10% from €1 million to €1.5 million. Budget 2027 could increase this further, broaden the relief or allow proceeds reinvested in another qualifying business to benefit from rollover relief.

Davy believes that a more competitive CGT rate remains an important priority for supporting Ireland’s growing communality of investors and entrepreneurs.

Capital Acquisition Tax (CAT) – no change expected:

There is speculation that the Government may introduce a small cut to inheritance tax, with ministers lobbying on this issue in recent years. While the thresholds were increased modestly in Budget 2025, no changes were announced in Budget 2026.

Given the attention the Group B CAT threshold has received in recent years, it may be worth noting that any change now appears unlikely. The threshold, which applies to gifts and inheritances between grandparents and grandchildren, aunts/uncles and nieces/nephews, and between siblings, has been the subject of media and political discussion, particularly around its impact on individuals without children. While a number of TDs and commentators have called for an increase, and the issue featured in our pre-Budget submission, the Tax Strategy Group has indicated that raising the threshold would carry a significant Exchequer cost, making a change less likely in Budget 2027.

Pensions – incremental changes to the Standard Fund Threshold:

As noted in the Tax Strategy Group Papers, the Interdepartmental Pensions Reform and Taxation Group (IDPRTG) remains committed to the outstanding items and progressing pension reform. Areas of priority are single step authorisation scheme and In-Scheme Drawdown.

More changes are also expected to the Standard Fund Threshold (SFT) as the Department consider the remaining recommendations from the de Buitléir report.

The expected changes could involve a review of the valuation factors used to capitalise defined benefit pension schemes, allowing private pensions to discharge chargeable excess tax over a longer period and amendments to the public sector encashment option.

Some of these proposals may be considered as part of Budget 2027, but some may be looked at in the longer-term.

Personal taxes

Income tax – increase in higher tax threshold:

Tánaiste Simon Harris has stated his intention to deliver an income tax cut, with speculation that this could see the threshold at which people begin to pay the higher rate of income tax rise from €44,000 to €46,000. Such a move would equate to an annual tax saving of approximately €400. This would mark a return to gradual income tax reductions after Budget 2026 did not include changes to income tax bands.

Universal Social Charge (USC) – modest change to reflect minimum wage:

While there has been no formal indication regarding changes to USC in Budget 2027, it is expected that, as in previous years, the band will be increased modestly to account for changes to the minimum wage. The Low Pay Commission has recommended an increase in the minimum wage by 5.6%, which is being considered as part of Budget 2027.

Climate & Energy

Energy and sustainability – support measures and carbon tax deferrals:

The Government is looking at a suite of measures to keep energy bills down both in Budget 2027 and longer term. These may include a lower rate of VAT for electricity, which would likely require a derogation from the European Union.

Government is also examining making changes to carbon tax which could see planned increases in the coming years reduced or halted while energy uncertainty and high costs remain.

Other measures being considered include strengthening grants for retrofits and renewable energy such as solar panels and domestic battery storage for households.

Ahead of the Budget, the Government has confirmed that the temporary excise cut to fuel, introduced to help consumers deal with higher energy costs as a result of the war in the Middle East, will continue in the immediate term and will not come out of Budget 2027.

Budget 2027: the Davy view

Budget 2027 presents a challenge for a Government that is aiming to improve the business environment through structural tax reform over the next several years. However, political and economic realities, particularly affordability challenges exacerbated by global economic events, may restrain such reform efforts. It will become clear on Budget Day.

The scale of tax reform that is likely to be passed is less than what we called for in our pre-Budget submission, but there are positives in terms of the direction of travel on personal and business taxation.