Minsters Donohoe and Chambers delivered a targeted Budget 2026 which prioritised the housing crisis and employment protection over personal tax relief measures. A number of key tax reliefs and incentives were extended out to 2030 which coincides with the expected term of the current Government. The combination of capital funding, tax support measures and revisions to apartment design specifications agreed earlier in the year, it is hoped that these measures will be sufficient to bridge the viability gap currently identified by developers.
Personal Tax
There were little in the way of income tax measures announced in Budget 26 for individuals. There was an increase of €1,318 in the 2% USC rate band to reflect the increase in the minimum wage from €13.50 to €14.15 which comes into effect from 1 January 2026. For the first time in 5 years, there was no increase in tax credits or an increase in the standard income rate tax band.
The rent tax credit which was introduced for the tax years 2022 to 2025 has been extended for a further three years to 31 December 2028. The value of the tax credit remains the same and offers a maximum of €1,000 per single individual and €2,000 per jointly assessed couple. This relief can also be claimed for rent paid in respect of a child under 23 attending an approved education course.
Mortgage interest relief has been extended on a tapered basis to 31 December 2026. 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. 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.
The benefit in Kind (BIK) temporary relief of €10,000 applied to the open market value of vehicles in the category A – D and the amendment to the highest mileage band have been extended to 31 December 2026. The temporary changes were due to expire at 31 December 2025. The relief of €10,000 will taper to €5,000 in 2027, €2,500 in 2028 before it is abolished from 1 January 2029. A new A1 category introduces reduced BIK rates for electric vehicles with zero emissions, with rates of 6 percent to 15 percent, depending on business mileage.
The income tax relief that exempts income up to €400 per annum from the micro-generation of electricity is extended to 31 December 2028.
One must not lose sight of tax announcements from previous budgets which are going to come into force in the coming months. The rate of PRSI for employees and employers increases by 0.1% from 1 October 2025 with a further increase of 0.15% on 1 October 2026, 0.15% on 1 October 2027 and the final 0.2% on 1 October 2028. Pension Auto-enrolment is also expected to come into operation on 1 January 2026 for employees who are not currently enrolled in a company pension scheme. It is expected that further legislative provisions on this scheme will be contained in the Finance Bill 2025.
Business Taxes
The enhancements to the R & D tax credit regime is a welcomed measure to keep Ireland to the forefront in attracting inward investment in the current economic climate. The enhancements include the rate of the tax credit increasing from 30% to 35%. The is also an increase in the first-year payment threshold from €75,000 to €87,500 aimed at supporting smaller R&D projects. The Minister also announced an administrative simplification measure which will allow 100 percent of an R&D employee’s emoluments as qualifying costs where at least 95% of time is spent on qualifying R&D activities.
The Minister also announced extensions to the following reliefs
- Key Employee Engagement Programme (KEEP) – to 31 December 2028
- Special Assignee Relief Programme (SARP) – 31 December 2030
- Foreign Earning Deduction (FED) – 31 December 2030
These are all welcome measures as they are centred on attracting and retaining employment in the Irish Economy. More details on simplification and relevant administrative requirements are expected in the Finance Bill 2025.
Following the participation exemption on foreign dividends introduced in last year’s Finance Bill, the Minister announced further changes will be provided in the Finance Bill 2025 which will include;
- Broadening the geographic scope to include qualifying dividends received from jurisdictions that apply a non-refundable dividend withholding tax.
- The period for which companies must have been resident in a jurisdiction within the geographic scope of the relief before paying a dividend will be reduced from five years to three years.
- Clarification was provided that the acquisition of a shareholding is not considered to be an acquisition of business assets for the purposes of the participation exemption.
The government acknowledges the contribution of the film and gaming industry to the Irish economy. The film tax credit is being enhanced to introduce a new 40% rate for productions with a minimum eligible expenditure of €1 million on relevant visual effects work. The Digital Games Tax Credit is being enhanced to allow for claims in respect of post-release content work, subject to certain conditions being satisfied. The Digital Games Tax regime is also being extended to 31 December 2031. Both of these enhancements are subject to EU approval.
As part of the Government’s Green agenda, the accelerated capital allowances scheme for energy efficient equipment which provides for a full tax write off on the cost of qualifying equipment in the year of acquisition is being extended to 31 December 2030. The accelerated capital allowances scheme for gas vehicles and refuelling equipment is being extended to 31 December 2030. These are very welcome measures and helpful to businesses focusing on sustainability plans, carbon footprint and business cost savings.
There was a welcome change in the capital gains tax entrepreneur relief. The Minister announced an increase in the lifetime ceiling from €1M to €1.5 for individuals disposing of a shares/business assets in a qualifying business. The change will come into effect for transactions post 1 January 2026. Entrepreneur Relief reduces the standard rate of capital gains tax, currently 33% down to 10%. The maximum saving available under entrepreneur relief is now €345,000, being the difference between 10% and 33% on a qualify disposal up on €1.5M (max).
Housing Measures
The current housing crisis was a central theme of Budget 2026 with multi expenditure and tax measures introduced to increase the housing supply and address affordability. A record €7.2 billion in capital funding was allocated to the Department of Housing, alongside other investments, to significantly boost housing construction. The tax measures announced apply to new constructions and bring existing residential properties back into use.
The VAT rate on new apartment sales was reduced from 13.5% to 9% to make more schemes viable for developers. This change comes into effect on 8 October and will remain in place until 31 December 2030.
The Residential Development Stamp Duty Refund Scheme was extended to 2030, The scheme provides for a partial repayment of Stamp Duty on the conveyance or transfer of land where the land is developed for residential purposes within a certain timeframe. The scheme is being enhanced by extending the time limits that apply to refund applications for large scale residential developments, for acquisition to commencement and for commencement to completion, from 30 months to 36 months. A full Stamp Duty refund claim is also proposed for multi-phase developments, which will be available at the commencement of the first phase of that development.
Previous reports prepared at the request of the Government have highlighted large numbers of vacant properties in the state, particularly in our cities. The living city initiative is now extended to 31 December 2030 and will now be open to properties built before 1975, previously this was restricted to properties built pre 1915. The maximum relief has also increased from €200,000 to €300,000. The cities now covered by the relief include Athlone, Cork, Dundalk, Dublin, Galway, Kilkenny, Letterkenny, Limerick, Sligo and Waterford.
The income tax deduction for small landlords who retrofit their properties is extended for a further 3 years, to 31 December 2028. The relief will also now be allowed to be claimed in respect of the year in which the expenditure is incurred and the number of properties for which landlords can claim relief is increased from two to three.
A new corporation tax exemption for cost rental income will apply to rental profits derived from residential properties designated as Cost Rental to accelerate the delivery of affordable housing. Cost Rental is a tenure model established under Part 3 of the Affordable Housing Act 2021, aimed at supporting moderate-income households who fall outside the eligibility criteria for social housing. Strict eligibility criteria and operational rules apply to ensure transparency and alignment with the scheme’s objectives. The exemption will apply from 8 October 2025.
A newly announced enhanced corporation tax deduction allows developers to claim 125 percent of qualifying construction costs, subject to a cap of €50,000 in additional deductible costs per apartment unit. The measure is aimed at improving the financial viability of apartment development projects by bridging the gap between development costs and achievable market prices.
Key features of the measure include:
- Deduction rate: Qualifying construction costs will attract a deduction of 125 percent, capped at an additional €50,000 per unit, equating to a maximum tax benefit of €6,250 per apartment.
- Ownership requirement: The developer must be the beneficial owner of the property at the time of completion.
- Project size: Relief is available for developments comprising 10 or more apartments.
- Eligible projects: Applies to both new-build and conversion projects, including changes of use (e.g. office or retail to residential).
- Timing: Relief is available for projects where a Commencement Notice is submitted between 8 October 2025 and 31 December 2030.
- Claim point: The deduction becomes claimable upon completion, evidenced by the signing of the Certificate of Compliance.
Budget 2026 introduces further refinements to the residential zoned land Tax (RZLT) framework, aimed at improving fairness and administrative clarity for landowners. Key updates include an additional submission window for landowers to request a change in zoning for lands included on the revised 2026 RZLT map, exemption during planning appeals where proceeds are initiated by a third party and legislative amendments to take account of changes arising from the Planning and Development Act 2024. These changes will be introduced as part of the Finance Bill 2025.
Agri – Tax Measures
This year, as in previous years, a number of key reliefs for the agricultural sector have been extended.
The Accelerated Capital Allowances Scheme for the construction of slurry storage facilities by farmers has been extended 31 December 2029. This allows the tax write-off on this capital investment over 2 years compared to the standard write-off period of 7 years for farm buildings and 8 years for plant and machinery. This is a welcome measure to support environmentally sustainable agricultural infrastructure and aids the financial burden of such investments.
The Farm Restructuring Relief provides a capital gains tax relief for farmers undertaking land consolidation and restructuring. This relief has been extended to 31 December 2029. The scope of the relief was also extended to include commercial forestry land and non-commercial woodland/forestry. The modifications to the relief will be subject to a commencement order following EU notification.
Farm Consolidation Stamp Duty Relief which was due to expire on 31 December 2025 has been extended by a further 4 years to 31 December 2029. The relief provides that a 1 percent rate of stamp duty is charged on the net difference between the value of land sold and land acquired as part of a Teagasc certified farm consolidation. In addition, the scope of the relief is being broadened to include non-commercial woodland/forestry. The extension of the relief requires EU notification, and the timing of the amendments will be subject to a ministerial commencement order at a later date.
The Young Trained Farmer Stamp Duty relief is also being extended to 31 December 2029. The relief provides a full exemption from stamp duty on the transfer of farmland, subject to certain conditions being met. This extension also requires EU notification will be subject to a commencement order at a later date.
The Farmer’s Flat Rate Payment is cut by .6% percent falling from 5.1 percent to 4.5 percent with effect from 1 January 2026. The Flat Rate scheme continues to provide simplified VAT relief for farmers who choose not to register for VAT, helping to offset input costs without the administrative burden of full VAT compliance.
VAT and Duty
From 1 July 2026, the VAT rate applied to businesses in food and catering and hairdressing services is being reduced from 13.5 % to 9 %. This has been lobbied for over the last 2 years and is a welcomed announcement. The change comes into effect from1 July 2026 which will lag 6 months behind the minimum wage increases which comes into effect on 1 January 2026 and is something of a concern for those operating in the sector.
The reduced VAT rate of 9 percent on gas and electricity bills which was due to expire on 1 November 2025 will be extended until 31 December 2030.
As outlined above, the VAT rate on the sale of new apartments will decrease from 13.5% to 9%.
The Minister announced the commencement of a phased implementation of domestic electronic invoicing for business-to-business (B2B) transactions. This implementation supports the EU approved VAT in the Digital Age (ViDA) initiative which aims to modernise the EU’s VAT system. Revenue is expected to publish further details on 8 October.
The cost of a 20 pack of cigarettes increased by an extra 50c, with pro-rata increases to the price of related tobacco products.
Carbon tax will be increased from €63.50 to €71.00 per tonne of CO2. This increase will be applied to petrol and diesel from 8 October 2025, and all other fuels from 1 May 2026.
The VRT relief for electric vehicles is being extended to 31 December 2026. This was due to expire on 31 December 2025.
Disclaimer
This briefing is provided for general information purposes only and is not a comprehensive or complete statement of the issues it relates to. It should not be used as a substitute for advice on individual cases. No liability is accepted by BCA for any loss incurred to any person as a result of any material in this briefing.