This year’s Budget, presented on 7 October, comes as Ireland stands at a pivotal point, facing a rapidly changing geopolitical and tax landscape. Global economic conditions, and the uncertainty as to the impact of US tariffs, combined with a raft of domestic challenges, make balancing fiscal discipline and strategic investment challenging.
There were no changes to the rates of tax apart from a reduction in funds exit tax. Many current reliefs that have a sunset of December 2025 have been extended for several years into the future. The overall tax landscape remains unchanged, but the precise impacts will not be clear until the Finance Act is passed.
The VAT rate applicable to the sale of residential apartments will reduce to 9% from 13.5%
Cost of living and housing
The government outlined a number of targeted measures to address cost-of-living increases and the housing crisis.
The minimum wage will increase to €14.15 per hour from 1 January 2026, while the minimum rate of Universal Social Charge will be amended to keep minimum wage earners within the 2% bracket. Mortgage Interest Tax Credit and the Rent Tax Credit will be extended, as will the Living City Initiative and income tax relief for retrofitting by landlords.
Concentrated approach
Although the government has enjoyed a significant surplus in this year, there would be a deficit if windfall corporation tax revenue is excluded, so the sources of taxation remain highly concentrated.
Corporation tax collected is out of line with international norm, with approximately 29% of all tax collected being derived from corporation tax. The ten largest taxpayers account for over half of that revenue, with the top 6% of earners pay almost 50% of the income tax.
A Derelict Property Tax will be introduced, along with an enhanced corporation tax deduction for qualifying apartment construction costs. There will also be an exemption from corporation tax for rental profits arising from homes that are designated as Cost Rental Scheme properties.
The Residential Development Stamp Duty Refund Scheme will be extended to 31 December 2030, while the VAT rate applicable to the sale of residential apartments will reduce to 9% from 13.5%.
Investment and business
From a business perspective, key measures introduced include increasing the lifetime limit for capital gains tax (CGT) Entrepreneur Relief from €1m to €1.5m from 1 January 2026, and a new exemption from the 1% stamp duty on acquisitions of shares in Irish registered companies.
The Key Employee Engagement Programme and the Special Assignee Relief Programme (SARP) will be extended; from 1 January 2026, new claimants of SARP must have an annualised salary of at least €125,000.
The rate of the R&D tax credit will increase from 30% to 35%
A number of announcements will affect foreign earnings. The Foreign Earnings Deduction will be extended to 31 December 2030, and the maximum emoluments that qualify for relief will increase from €35,000 to €50,000 from 1 January 2026. The rate of Life Assurance Exit Tax and offshore funds that are considered equivalent to Irish domiciled funds is being reduced from 41% to 38%. In addition, several changes to the participation exemption for certain foreign distributions and specified intangible assets will be provided for in Finance Bill 2025.
The rate of the R&D tax credit will increase from 30% to 35%. The first-year payment threshold will increase from €75,000 to €87,500 to further support smaller R&D projects.
In terms of creative industries, the Digital Games Corporation Tax Credit will be extended to 31 December 2031. The Film Tax Credit of 32% on qualifying expenditure of up to €125m on certain productions will be enhanced to provide for a new 40% rate for projects with a minimum of €1m of eligible expenditure on relevant visual effects work.
The farming sector will also benefit from a number of measures. Relief from CGT for farm restructuring, Farm Consolidation Relief, Accelerated Capital Allowances and stamp duty relief for the transfer of land to young trained farmers will be extended.
Climate
The Budget also introduces a number of climate-related measures, primarily concerning vehicles and fuel.
It may be argued that the Budget fails to fully address the cost-of-living crisis
The rate of carbon tax will increase by €7.50 from €63.50 to €71 per tonne of carbon dioxide emitted for petrol and diesel from 8 October 2025 and to all other fuels from 1 May 2026.
The Accelerated Capital Allowances schemes for gas vehicles and refuelling and energy-efficient equipment have been extended to 31 December 2030.
For vehicles, the vehicle registration tax relief for electric vehicles will be extended to 31 December 2026. The relief applied to the original market value of cars in the categories of A-D and all vans will remain at €10,000 for 2026, reducing to €5,000 for 2027 and €2,500 for 2028. From 1 January 2026, there will be a new vehicle category (A1) for employer-provided zero-emission vehicles for business-in-kind purposes.
Other changes
In other areas, the pension Auto-Enrolment Savings Scheme is due to begin on 1 January 2026. The forthcoming Finance Bill will include additional amendments to the tax treatment of the Auto Enrolment Retirement Savings Scheme.
The VAT rate applying to businesses in food and catering and hairdressing services will be reduced from 13.5% to 9%. The 9% rate of VAT for electricity and gas supplies will be extended until 31 December 2030.
While it may be praised for its targeted measures to address the housing crisis, it may be argued that the Budget lacks meaningful relief for middle-income earners and fails to fully address the cost-of-living crisis. It will be interesting to see how the impact of these measures plays out, but the precise effects will not be clear until the Finance Act is passed.
