Budget 2027 is incremental rather than transformative for private equity: a 2-point cut in capital gains tax, a lower exit tax on funds, promised simplification of interest relief, R&D credit enhancements and simpler preliminary corporation tax rules.

None of these rewrites deal economics, but together they modestly improve exit returns, fundraising conditions and portfolio cash flow.

Minister for Finance Simon Harris announced Budget 2027 in the Dáil on 6 October 2026. Much of the technical detail that matters to sponsors will only appear in the Finance Bill, expected to be published later this month, so the analysis below is a first read.

1. Capital gains tax cut to 31%: better net proceeds on exits

The standard CGT rate falls from 33% to 31% for disposals made on or after 7 October 2026, the first cut to the headline rate in over a decade. Gains on disposals of development land are excluded and remain taxable at 33%. It fits the Minister’s framing of a Budget in which risk is repaid.

For PE, the benefit flows to Irish-resident individuals on the sell side and inside the deal:

• Founder and family vendors keep 2 percentage points more in gains, which may nudge hesitant owners towards a sale or a partial recapitalisation.
• Management teams see a higher after-tax value on sweet equity and rolled-over stakes, improving the pull of management incentive plans.
• Irish-based deal executives benefit where carried interest and co-investment returns are taxed as capital gains.

Timing matters. The lower rate applies only to disposals made on or after 7 October 2026, and for CGT purposes, the time of disposal is generally when the contract is made (or, for a conditional contract, when the condition is satisfied), not when the deal completes. Vendors who signed before Budget Day should check which rate applies. Sellers of real estate or housebuilding platforms should also confirm whether any part of the gain relates to development land, which stays at 33%.

The cut is modest. Advisers had pressed for a phased cut to 20% in pre-budget submissions, so 31% is a first step rather than a reset.

2. Interest relief simplification: watch the Finance Bill for acquisition finance

The Minister will bring targeted Finance Bill amendments to simplify interest relief on borrowings used for certain lending and investment activities. This follows an extensive public consultation and review of Ireland’s tax regime for interest, and the Minister confirmed that the wider review will continue in 2027.

This is potentially the most important measure for leveraged buyouts. Ireland’s overlapping interest rules add cost and uncertainty to acquisition debt structuring. Many commentators had flagged complex interest rules as a drag on M&A and inbound investment.

The scope is not yet clear. Sponsors should review ongoing and planned financings once the Bill is published, particularly bidco/target debt push-downs and refinancings, before assuming that any new relief applies.

3. Fund exit tax down to 35%: a slightly larger domestic capital pool

Investment Undertaking Tax and Life Assurance Exit Tax on Irish and equivalent offshore funds drop from 38% to 35% from 1 January 2027, following last year’s cut from 41%.

The direct effect on institutional PE fundraising is limited, since most LPs are tax-exempt or non-resident. The indirect effect is more relevant for managers building wealth-channel and semi-liquid products, including Irish-domiciled ELTIFs and private markets feeders sold through private banks. A 4-point gap remains between the fund rate (35%) and CGT (31%), and the deemed disposal rule is unchanged for now, so Irish retail access to private markets through funds is still taxed less favourably than direct holdings. Those managers should follow the review of the wider taxation of retail investment, including the rate of tax and the deemed disposal rule, which the Minister confirmed for 2027.

4. R&D credit enhancements: faster cash for portfolio companies

The headline R&D credit rate is unchanged at 35%, but several mechanics improve, following last year’s review and the R&D Tax Credit and Innovation Compass.

The first-year payment threshold rises from €87,500 to €105,000, so the first €105,000 of a claim is paid in full in year one rather than over three annual instalments. The limit on R&D subcontracted to universities and third parties also widens, from the greater of 15% of internal qualifying R&D spend or €100,000 to the greater of 20% or €200,000.

Three further changes were announced:

• Companies may increase their qualifying cost base by 5% of qualifying R&D wage costs, subject to a sufficient level of expenditure.
• The rules governing the use of the credit to meet preliminary corporation tax obligations will change.
• A regulated clinical trial may also be used to satisfy the science test. This provision will be introduced at Committee Stage of the Finance Bill.

Separately, the Knowledge Development Box is extended for a further five years to 1 January 2032, with a limited option for existing claimants to opt out.

For tech, life sciences and engineering portfolio companies, the higher first-year threshold accelerates cash refunds on smaller claims. The wider subcontracting limit suits asset-light businesses that outsource development or work with third-level institutions, and the clinical trial change may broaden the scope of qualifying activity for life sciences businesses. These changes support value-creation plans and should be built into cash-flow forecasts and due diligence on R&D claims.

5. Portfolio company operations: easier tax admin, higher labour costs

The Minister announced administrative changes to preliminary corporation tax. A company will meet its obligations if it pays at least 80% of its current-year liability by the final instalment date and tops up to 100% within four months of the end of the accounting period. An underpayment of the second instalment will no longer cause the first to be treated as underpaid, and the “small company” threshold rises from €200,000 to €350,000. For portfolio companies with lumpy profits, including those in a growth or post-acquisition phase, more flexible preliminary tax rules should reduce the risk of interest charges and improve working-capital planning.

Other administrative changes will reach portfolio companies. Employers will be able to choose monthly payroll returns instead of real-time reporting under the enhanced reporting requirements. Portfolio companies paid by public bodies, for example, in healthcare or professional services, will see professional services withholding tax move from a flat 20% to personalised deduction rates, subject to a Commencement Order. Larger PE-owned groups within scope of Pillar Two should note that the Finance Bill will implement the OECD Side-by-Side Package, including new safe harbours, and update the penalty and filing provisions.

Against this, labour costs keep rising, with some offsets. The minimum wage goes up by 79 cent per hour, and employee PRSI rose to 4.35% on 1 October 2026 ahead of a further step to 4.5% in October 2027. On the other side, the employer PRSI threshold rises from €552 to €600 per week in 2027, slightly reducing employer costs for lower-paid staff. Hospitality, retail, care and services platforms should refresh budgets and EBITDA forecasts, especially where buy-and-build models depend on low-margin labour.

What to watch next

The Finance Bill, expected this month, will decide how far the interest reforms extend and set out the details and any transitional rules for the CGT, fund, and R&D changes. The CGT rate already applies to disposals from 7 October 2026 and the 35% fund rate from 1 January 2027. Two items on the industry wish-list did not feature in the Budget announcements: a further increase in the €1.5m Entrepreneur Relief lifetime limit and a deeper capital tax reform. Sponsors should check the Bill for both before updating exit models or management incentive terms.

Three reviews flagged for 2027 are also relevant to sponsors: the continuing review of Ireland’s tax regime for interest, which will shape acquisition finance structures; the review of the taxation of retail investment, which matters for wealth-channel fundraising; and a holistic assessment of enterprise grants and tax incentives, which may affect support available to portfolio companies.

This article is a general overview based on Budget-Day announcements and press reporting; it is not legal or tax advice.