Budget 2026: Summary and Key Changes

Budget 2026 stands in stark contrast to recent years, in that it prioritised business measures over cost-of-living supports. 

The Budget was prepared on the back of uncertainty in the global economy, with the Government’s objective being three-fold, boost housing supply, protect jobs and protect growth. The total package announced in the Budget was €9.4 billion, a decrease of €1.1 billion compared to the ‘give-away’ Budget 2025, which was announced in advance of the General Election. 

While we look forward to the Finance Bill which will provide more detail and may set out further changes, we have outlined some of the additional tax changes which we consider most relevant.  

Personal taxes & Capital Acquisitions Tax (CAT)

For the first time since 2021, there were no increases to the personal income tax bands. An adjustment to the 2% USC band will provide a nominal benefit to workers however this change will largely be offset by the increase in employee PRSI.

As the family home is typically the main asset that people inherit, we were disappointed to see no increase to the CAT thresholds. Given the appreciation in property values in recent years, many families will be left with no alternative but to sell the family home to fund the CAT bill on the inheritance.  

Saving and Investing

In a welcome move for investors, Budget 2026 included a reduction in the tax rate applicable to funds and Life Assurance products from 41% to 38%. 

While the Budget did not directly address the eight-year deemed disposal rule, the subsequent publication of the Funds Sector 2030 Implementation Plan (effectively a roadmap for reform) signals that a broader review is underway, including addressing the eight-year deemed disposal rule. We also welcome the Government’s commitment to publish early next year, a strategy to simplify Ireland’s tax framework to support investment in line with the EU’s Savings and Investments Union. These developments point to the prospect of a more efficient tax environment for long-term investors and ultimately increased investor involvement in capital markets.

We also welcome the proposal for a saving and investment forum, as the industry currently has no forum which brings together key stakeholders with Government to discuss broader issues that are holding-up greater retail participation in capital markets.

A new stamp duty exemption will apply to transfers of stocks or marketable securities if they are traded on a regulated market and the issuing company has a market capitalisation below €1 billion. This targeted incentive is with a view to boosting investment in emerging or mid-sized firms listed on regulated markets and will expire on 31st December 2030. 

Tax changes for businesses

Budget 2026 introduced a range of positive measures aimed at strengthening support for businesses navigating ongoing market volatility and the persistent pressure to stay competitive. 

• Revised Entrepreneur Relief currently provides a reduced rate of 10% CGT for qualifying entrepreneurs. The lifetime limit on gains to which the relief applies is increased from €1 million to €1.5 million for disposals made from 1st January 2026. While only a small move in the right direction, this could result in a potential saving of up to €115,000 while also encouraging entrepreneurial activity. 
• From 1st July 2026, a reduced 9% VAT rate for food and catering businesses, as well as for hairdressing services. 
• The Key Employee Engagement Programme (KEEP), which can assist smaller businesses to incentivise key employees, is to be extended until the end of 2028.
• The Special Assignee Relief Programme (SARP) has been extended for a further five years, with an increase to the minimum income threshold to €125,000 from 2026.
• R&D tax credit rate to increase from 30% to 35%. This is a positive step for competitiveness. In addition, the first-year payment minimum threshold is to increase from €75,000 to €87,500 to support smaller R&D claims.  The tax credits show that the Government is committed to supporting innovation. 

Pensions

There were no changes to private pensions announced in Budget 2026.

Minister Chambers noted the introduction of pension auto enrolment from 1st January 2026 is expected to benefit around 750,000 people. This is a welcome initiative designed to increase pension coverage more broadly across Ireland.

Further detail is expected in the Finance Bill with additional amendments to the tax treatment for the Auto Enrolment Retirement Savings Scheme already confirmed.

January 2026 will also bring the first €200,000 increase to the Standard Fund Threshold (SFT) which was announced in last year’s Finance Bill. For 2026 the SFT will be €2.2m. 

Individuals accessing pensions prior to the end of 2025 should consider how this impacts their future retirement plans as values retired in 2025 will be adjusted upwards in line with the SFT increase. If possible, delaying the pension retirement to when the higher SFT is in place could result in a better outcome.

 

Housing changes

As anticipated, housing was a key area of focus in the budget. Several measures were introduced with the clear intention to encourage activity and ultimately increase the national housing stock including:

• A reduced 9% VAT rate (down from 13.5%) will apply to the sale of new completed apartments from 8th October 2025. 
• The Residential Development Stamp Duty Refund Scheme is being extended to 31st December 2030.
• There will be an enhanced Corporation Tax Deduction for qualifying apartment construction costs.
• A Corporation Tax exemption is being introduced in respect of profits associated with Cost Rental Units. 
• For landowners affected by the Residential Zoned Land Tax (RZLT), the ability to be exempted from RZLT for 2026 is extended, where there is genuine activity on the land in question.

Summary

As we await the publication of the Finance Bill and Finance Act to fully assess the impact of Budget 2026, one theme is already clear: the Government’s primary focus is on supporting the housing market. While there were welcome changes to the Fund Exit Tax and Revised Entrepreneur Relief regimes, these enhancements remain relatively modest. We hope that next year’s roadmap aimed at encouraging retail investment will signal more substantial developments throughout the remainder of this Government’s term.

At Davy, our priority is helping you navigate these developments with confidence. We take the time to understand your individual circumstances and financial goals, incorporating the potential impact of taxation to ensure your plans remain efficient and effective. Our dedicated team is here to support you with a personalised financial strategy tailored to your unique needs.