Budget 2026 and Finance Bill 2025

The Minister for Finance delivered a cautious Budget for 2026, offering limited new reliefs for employees while prioritising the extension of existing supports. Following publication of Finance Bill 2025 on 16 October, the Budget measures have been confirmed with some additional technical clarifications and enhancements. For individuals and businesses alike, the focus was largely on continuity, with few headline-grabbing announcements. Below, we outline some of the key takeaways that will be of interest to employers, employees, and internationally mobile talent.

Limited income tax changes

Unlike previous years, Budget 2026 did not introduce any broad-based tax reliefs for workers. Crucially, there was no change to the income tax standard rate band or to personal and PAYE tax credits, meaning that middle- and high-income earners who receive wage increases in 2026 may find themselves paying more tax due to fiscal drag.

Universal Social Charge (USC) rates – minimum wage adjustments

However, there were some targeted supports for lower-income earners. The national minimum wage will increase by 65c to €14.15 per hour from January 2026. To ensure that full-time minimum wage earners are not disproportionately affected by higher USC rates, the 2% USC band has been increased by €1,318 to €28,700. While this adjustment provides a small benefit to all workers by keeping more income within the lower USC bracket, the impact is relatively minor. The Finance Bill extends the concessionary USC treatment for younger medical card holders for an additional two years to end-2027. Under this measure, full medical card holders under age 70 with annual earnings up to €60,000 continue to benefit from reduced USC rates.

Educational support

In terms of educational support, the Minister announced a permanent €500 reduction in the third-level student contribution charge, which will fall from €3,000 to €2,500. While this is less generous than the temporary €1,000 reduction offered in recent years, it marks the first long-term decrease in decades and is intended to offer ongoing support to working families with children in third-level education.

Investment and savings taxation

Finance Bill 2025 confirms that from 1 January 2026, investors will benefit from a lower tax rate of 38% (down from 41%) on returns from a range of investment products. The reduced rate applies to gains and income from life assurance policies issued in Ireland, qualifying foreign life policies, investment funds domiciled in Ireland, and comparable offshore investment vehicles located in EU member states, EEA countries, and OECD jurisdictions where Ireland has established tax treaties. This measure aims to make savings and investment products more attractive to retail investors.

Housing support measures extended but not enhanced

Housing remains a key pressure point for many, and Budget 2026 confirmed the extension of several reliefs, albeit without enhancement:

• The Rent Tax Credit, previously due to expire at the end of 2025, has been extended for three more years to 31 December 2028. The value of the credit remains unchanged at €1,000 per person or €2,000 per couple.
• Similarly, the Mortgage Interest Tax Relief, which had been reintroduced in a limited form in 2023, will also continue for a further two years. The relief for 2025 caps at €1,250 per property, calculated by reference to how much more interest a taxpayer paid in 2025 versus 2022. This reduces significantly in 2026, where only 50% of the interest increase (2026 versus 2022) qualifies for relief, capping the benefit at €625 per property.

While the extension of these measures is positive, the lack of increased value may leave some taxpayers feeling underwhelmed, particularly in the context of ongoing housing affordability challenges.

Key talent incentives retained

A significant focus of this year's Budget was on extending incentives aimed at attracting and retaining talent in Ireland:

• The Special Assignee Relief Programme (SARP), a critical tool in Ireland’s offering to mobile executives, has been extended for five years to 31 December 2030. However, the minimum income threshold for new entrants from 2026 will rise from €100,000 to €125,000. The Finance Bill introduces important administrative changes: employers now have until 30 June (previously 23 February) to file annual SARP returns. There is also greater flexibility around notification deadlines – while the standard 90-day notification window remains best practice, late notifications made within 180 days of an employee's arrival will still qualify for SARP relief, albeit for four years instead of five, starting from the tax year following arrival.
• The Foreign Earnings Deduction (FED), which provides tax relief to Irish employees working abroad in designated countries, has also been extended for five years. From 1 January 2026, the maximum qualifying income will increase from €35,000 to €50,000, and the scope of the relief will be expanded to include Turkey and the Philippines. A welcome simplification introduced in Finance Bill 2025 removes the previous rule requiring three consecutive working days in an eligible territory. This change makes FED more practical for employees taking shorter or more frequent international business trips.
• The Key Employee Engagement Programme (KEEP), which is a tax-efficient share option scheme for SMEs, has been extended to 31 December 2028, subject to European Commission approval. While no simplification of the scheme was announced, its continuation offers some certainty to high-growth businesses looking to reward and retain staff.

Company car benefit-in-kind (BIK)

In a welcome move for employers and employees alike, the Government announced a tapered extension of the BIK relief on company cars and vans. The relief, which provides for a €10,000 reduction in the original market value of a vehicle for BIK purposes, was due to expire at the end of 2025. It will now be extended as follows:

• €10,000 relief retained for 2026
• Reduced to €5,000 in 2027
• Reduced to €2,500 in 2028
• Abolished in 2029

In addition, a new A1 vehicle category was introduced for zero-emission vehicles, which will now benefit from the lowest BIK rates (6-15%), depending on business mileage. This further incentivises employers to transition their fleets to more sustainable options. The Finance Bill also confirms that the lower mileage limit in the highest mileage band for employer-provided cars has been permanently reduced from 52,001km to 48,001km from 1 January 2026, and Category A has been amended to apply to cars with emissions of over 0g/km and not exceeding 59g/km.

Additional personal tax measures

The Finance Bill includes several other noteworthy changes:

• Revised Entrepreneur Relief: Entrepreneurs disposing of qualifying business assets can now benefit from a preferential 10% CGT rate on gains up to €1.5 million over their lifetime (increased from €1 million), effective for disposals from 1 January 2026. Those who previously used their full €1 million allowance can access an additional €500,000 of relief on subsequent qualifying disposals.
• Business property relief (CAT): Business property relief (which provides 90% CAT relief on qualifying business assets) has been amended from 1 January 2026. The change expands the definition of “excepted assets”, which are assets not used for business purposes during the relevant two-year period. Where an asset has not been used wholly or mainly for the purposes of the business for a two-year period prior to the date of the gift or inheritance but was required to be used for a specific purpose of the business within the following six-year period, then it will not be an excepted asset.
• Donations to sports bodies: Various administrative changes have been made to the scheme for tax relief on donations to certain sporting bodies, including making an individual's decision irrevocable on whether to claim relief themselves or allow the sporting body to claim it.

Conclusion

While Budget 2026 does not deliver sweeping changes for employees or employers, it does offer certainty and continuity, particularly around reliefs aimed at international talent, mobile employees and SMEs. For businesses, the extension of SARP, FED and KEEP, along with the continued BIK relief, provides a solid foundation for planning over the coming years. The Finance Bill’s administrative improvements to SARP and FED, along with the enhanced entrepreneur relief and reduced investment taxation rates, add welcome detail and some additional benefits. However, many will be left disappointed with the lack of attention given to income tax thresholds and housing supports.

For expert advice on these and other employment tax issues, and to find out how we can help you make smart decisions today to create lasting value for your business, contact a member of our dedicated Employment Tax Advisory Services team.