Budget 2026: Challenges and opportunities for Irish SMEs
As Budget 2026 approaches, Irish SMEs find themselves facing significant challenges. Rising costs are squeezing margins and the window for tax-efficient exits is narrowing.
Budget 2026 needs to focus on two core themes from an SME perspective:
- Supporting business owners with rising costs, and
- Protecting value and maximising after-tax proceeds on disposal of a business
Rising costs
The introduction of additional costs on businesses through pension auto-enrolment and statutory sick pay has and will place huge pressures on P&Ls on a pan-industry basis from a cost control perspective. These additional costs are against a backdrop of a period of sustained cost inflation across raw materials and energy.
The Government has the opportunity with this Budget to support those businesses most acutely feeling the impact of these cost pressures, through:
- Targeted VAT reductions in key industries like hospitality and retail
- Targeted measures to reduce the burden of PRSI on these sectors, including a deferral of the increase in employers’ PRSI and reforming the PRSI thresholds to increase the entry level and extending the PRSI bands.
Protecting value
For many SME owners, their personal value is tied up in their business. Realising that value that has been built up over a lifetime in a manner that is tax-efficient while also allowing the business to flourish under new ownership can be complex. While there are reliefs available, such as retirement and entrepreneur relief, these can be difficult to navigate.
For example, these reliefs can be particularly difficult to access when ownership is being transferred on a gradual basis to the next generation, while current tax legislation adds additional layers of complexity to management buyouts where the reliefs are being sought. These roadblocks need to be addressed to support the transition of ownership of businesses.
The difference between a well-structured exit and a poorly timed one can be hugely significant in after-tax proceeds. If the government wants to encourage reinvestment and generational transition, it must reward, not penalise, those who’ve built value over decades. An expansion and simplification of the reliefs available is the foundation of this.
From a business owner’s perspective, it is important that an appropriate corporate structure is put in place to enable you to avail of the reliefs that are currently there; this is something that should be considered well in advance of any disposal and business owners should take timely tax and legal advice in that regard.
Conclusion
SMEs are the backbone of our economy and need to be both supported to grow and incentivised to realise capital value. Budget 2026 has an opportunity to address these core issues.
Our Budget 2026 webinar, featuring leading economic analyst and commentator Jim Power along with a panel of Crowe Ireland experts moderated by tax partner Claire Davey, is now available to view on demand. Click here to to find out more about what Budget 2026 means for business owners across all sectors.
