Financial Summary

The Minister for Finance announced a personal income tax package of €1.3 billion, with an expected Budget surplus of €9.5 billion for 2027. He also announced that an additional €1 billion would be invested in the Future Ireland Fund next year, on top of the already planned investment of €4.8 billion.

Domestic

The Minister also confirmed a reduction in the tax rate for certain Irish and equivalent offshore funds, as well as for foreign life assurance products, from 38% to 35%.

The standard rate of capital gains tax will be reduced from 33% to 31%, with effect from 7 October 2026, though disposals of development land will not be affected.

From 7 October 2026, the capital acquisitions tax thresholds for gifts or inheritances will increase as follows:

• Category A Threshold to €420,000;
• Category B Threshold to €44,000; and
• Category C Threshold to €22,000.

The Bank Levy will be extended in its current form for 2027 with an expected yield of 200 million.

Professional Services Withholding Tax will be modernised by introducing personalised deduction rates, which will replace the current 20% flat withholding rate on gross payments.

Corporation Tax

A number of administrative changes will be made to the preliminary corporation tax regime, including an increase in the ‘small company’ threshold from €200,000 to €350,000.

The Corporation Tax Start-Up Relief is being extended by four years to 31 December 2030. It provides new start-up companies with relief from corporation tax on trading income (and certain capital gains) for their first five years of trading.

International

The Research and Development (R&D) tax credit regime will be enhanced through various measures, including increasing the amount of subcontracted R&D expenditure you can include in an R&D tax credit claim and raising the first-year payment threshold from €87,500 to €105,000.

The Minister announced that the Knowledge Development Box relief will be extended to 1 January 2032, and that the Relief from Tax for certain Start-Up Companies will be extended to 31 December 2030.

The following reliefs will be extended in their current form, subject to the adoption and entry into force of the new EU General Block Exemption Regulation which sets out certain rules in relation to State aid:

• Employment Investment Incentive;
• Start-Up Capital Incentive;
• Start-Up Relief for Entrepreneurs; and
• Relief for Investment in Innovative Enterprises (known as “Angel Investor Relief”).

Property

The tax-free threshold for the rent a room scheme will increase from €14,000 to €16,000 per annum from 1 January 2027. The scheme will also be extended to include newly installed detached auxiliary dwellings between 32 and 45 square metres and the extension will apply retrospectively from 27 July 2026.

The Minister announced that the rent tax credit would be increased by €150. the help-to-buy scheme has also been increased from €30,000 to €35,000, with effect from 7 October 2027.

The Residential Zoned Land Tax (RZLT) exemption window will be extended, allowing landowners to apply to local authorities for an RZLT exemption in 2027 to reflect the genuine economic activity for which the land was used.

In 2025, the Government announced plans to introduce a new derelict property tax to replace the derelict site levy. The Minister confirmed that the new derelict property tax will be legislated for in this year’s Finance Bill and will be charged at a rate of 7%. The Minister also stated that a preliminary register of derelict properties will be published, and that property owners will be able to request a review of their property’s inclusion on the register.

Employment, Income Tax and Pensions

The Minister announced that the standard rate cut off point for income tax would increase by €2,500 for all earners, and that the personal, employee and earned income credits would increase by €125. The ceiling for the 2% universal social charge rate will increase by €1,600, from €28,700 to €30,300. The employer PRSI threshold will increase from €552 to €600 per week in 2027.

The Minister confirmed that changes to the enhanced reporting requirements will be introduced in the Finance Bill, including an option for employers to either make monthly returns or continue with the current real-time reporting.

A new Investment Account is to be launched by providers on 1 July 2027. Investments made through the account will be taxed at a flat rate tax of 1% on the value of the account above a tax-free threshold of €50,000. An annual contribution limit of €12,000 will apply. The account will be available to Irish resident individuals, aged 18 and over, who hold a ‘personal public service number’ or ‘PPSN’, with only one account being available per person. The account value will be calculated daily, with the average of the daily values used to calculate any tax due. All tax reporting, tax administration and payment of any tax due to Revenue will be managed by the provider.

Pension funds that exceed the Standard Fund Threshold (SFT) at retirement are subject to chargeable excess tax on the excess. The age-related factors used to value ‘Defined Benefit’ entitlements for SFT purposes will be revised from 1 January 2027, with further details to follow in the Finance Bill.

Consultations and Initiatives

The Minister also flagged several initiatives that will be progressed in 2027. The ongoing review of Ireland’s tax regime for interest continues, along with a review of the wider taxation of retail investment, including the rate of tax, the deemed disposal rule and other administrative burdens on investors. A holistic assessment of enterprise grants, tax incentives and business development programmes will also be undertaken, taking account of the EU State Aid framework. Reviews will also be carried out of the ‘cycle to work’ and ‘tax saver’ schemes, and of the tax treatment of theatre production costs and supports for the night-time economy.

The Minister announced a personal income tax package of €1.3 billion. The key measures announced which will affect individuals and households are discussed below.

Standard Rate Band

The 20% standard rate band cut-off point will be increased by €2,500 for all earners. The following rate bands will apply for 2027:

Tax Credits

The personal tax credit, employee tax credit and earned income credit will increase by €125 from €2,000 to €2,125, and the home carer tax credit will increase by €100 from €1,950 to €2,050.

Universal Social Charge (USC)

An increase to the 2% USC band has been announced to ensure that minimum wage earners remain outside the higher USC rates.

The following USC rates will apply from 1 January 2027:

Capital Acquisitions Tax (CAT)

The CAT thresholds which apply to gifts and inheritances taken on or after 7 October 2026 will increase as follows:

Capital Gains Tax (CGT)

The standard rate of CGT in respect of disposals made on or after 7 October 2026 will reduce from 33% to 31%. However, disposals of development land will continue to be subject to CGT at 33%.

Investment Account

The Minister announced that a new Investment Account will be available from 1 July 2027 to Irish resident individuals aged 18 and over, as part of the work to encourage and support retail investment in Ireland. The Investment Account will be operated by private service providers such as banks, investment firms and insurance companies. Account holders will have the choice to invest in shares, bonds, investment funds and insurance-based investment products.

A €50,000 tax free threshold will apply to the Investment Account. A flat rate 1% tax will apply to the value of the Investment Account (based on the average of the account’s daily values) above that threshold. No other taxes (including capital gains tax, dividend withholding tax, investment undertaking tax and life assurance exit tax) will apply to the account, nor will the deemed disposal rule apply. Service providers will be responsible for all tax reporting, tax administration and payment of any tax due to the Revenue Commissioners.

The maximum annual contribution will be €12,000 and there will be no minimum contribution. Further details will be included in the Finance Bill.

Third-level Fees

Tax relief at 20% is currently available on qualifying third-level fees, but only on the amount above a fixed “disregarded” sum that is deducted once from each claim. The disregarded amount is now being reduced to match the Student Contribution Fee. Families paying for a second or later student can therefore claim relief on fees above that amount. The Student Contribution Fee is also reduced by €150.

The Nurturing Skills Learner Fund rebates relevant third-level course fees to students who stay in childcare employment for six continuous months after finishing the course. These rebates are being made tax exempt.

Childcare

Individuals who provide childminding services in their own homes on a self-employed basis may claim childcare services relief to exempt earnings from those services from income tax. As part of Budget 2027, the income threshold for this exemption has been increased from €15,000 to €20,000. In addition, the previous limit on the number of children who could be cared for under the scheme has been removed.

It was also announced that the maximum childcare fees paid by parents will be reduced from €735 to €550 per month for each child up to senior infants.

Donations of Heritage Items

The annual aggregate limit on the value of national heritage items that can be donated to an approved body is increasing by €4 million, from €8 million to €12 million. Under the scheme, a donor can claim a tax credit of 80% of the item’s market value. The credit can be offset against income tax, corporation tax, capital gains tax or capital acquisitions tax.

Micro-Generation of Electricity

Profits up to €400 from energy generation or from the sale of surplus electricity to the grid are currently exempt from income tax, universal social charge and PRSI in the hands of certain qualifying individuals. This exemption will be increased from €400 to €600.

Pensions

Pension funds that exceed the Standard Fund Threshold (SFT) at retirement are subject to chargeable excess tax on the excess. The age-related factors used to value ‘Defined Benefit’ entitlements for SFT purposes will be revised from 1 January 2027, with details to follow in the Finance Bill.

Excise Duty

The excise duty on a pack of 20 cigarettes will increase by 1 euro (inclusive of VAT), with a pro-rata increase on other tobacco products.

With effect from 1 January 2027, excise duty on all e-liquid products will be increased from 50 cents per millilitre (exclusive of VAT) to 70 cents per millilitre (exclusive of VAT).

Although not announced in the Budget speech, the Department of Finance’s ‘Budget 2027’ publication notes that a new “Pool Betting Charge” is due to commence on 1 January 2027. This will apply excise duty at a rate of 25% on commissions earned from ‘totalisator’ or pool betting.

Rate of Capital Gains Tax (CGT)

The standard CGT rate is reduced from 33% to 31% for disposals made on or after 7 October 2026. The 33% CGT rate applicable to the disposal of development land will remain unchanged, however.

Business Investment Reliefs

The following reliefs will be extended in their current form, subject to the adoption and entry into force of the new EU General Block Exemption Regulation which sets out certain rules in relation to State aid:

• Employment Investment Incentive;
• Start-Up Capital Incentive;
• Start-Up Relief for Entrepreneurs; and
• Relief for Investment in Innovative Enterprises (known as “Angel Investor Relief”).

Corporation Tax Start-Up Relief

This relief is being extended by four years to 31 December 2030. It provides new start-up companies with relief from corporation tax on trading income (and certain capital gains) for their first five years of trading.

Research and Development (R&D) Tax Credit Enhancements

The following enhancements to the R&D tax credit regime were announced, following last year’s review and publication of the ‘R&D Tax Credit and Innovation Compass’:

• The R&D tax credit subcontracting limits are increased to the greater of 20% of internal qualifying R&D spend or €200,000 (up from 15% or €100,000). The aim is to encourage collaboration with third-level institutions and give companies access to external resources that support their in-house R&D.
• The first year payment threshold will rise from €87,500 to €105,000. The first €105,000 of a claim will now be paid in full in the first year rather than over the usual three annual instalments.
• The Minister announced changes to the rules governing how the R&D tax credit can be used to meet a company’s preliminary tax obligations.
• Claimant companies will be permitted to increase their qualifying cost base by 5% of qualifying R&D wage costs, subject to the company having incurred a sufficient level of expenditure.
• A regulated clinical trial may be used to satisfy the science test. A new provision will be added at the Committee Stage of the Finance Bill, as technical work on the legislation is still ongoing.

Knowledge Development Box (KDB)

KDB is extended for a further five years and existing claimant companies will have a limited option to opt out of the regime for all qualifying assets, subject to certain conditions.

Professional Services Withholding Tax (PSWT)

PSWT is being reformed and personalised deduction rates will replace the current flat rate of 20% of the gross payment. This change follow a public consultation announced in Budget 2026 and is subject to a Commencement Order.

Preliminary Corporation Tax (PCT)

The following administrative changes to PCT were announced:

• A company will meet its preliminary tax obligations if it pays at least 80% of its current year liability by the final instalment date and then makes a top-up payment to bring the total to 100% within four months of the end of the accounting period.
• An underpayment of the second preliminary tax instalment will no longer cause the first instalment to be treated as underpaid, subject to further detail and conditions to be included in the Finance Bill.
• There will be an increase from €200,000 to €350,000 in the threshold used to determine whether a company is regarded as a ‘small company’.

Agriculture

The following main measures were announced for the agricultural sector:

• Non-oral respiratory vaccines for livestock will now be subject to VAT at a reduced rate of 9% (down from 23%).
• The Farmer’s Flat Rate Addition for 2027 is 4.8%, up from 4.5% in 2025.
• The 50% annual accelerated capital allowance for eligible farm safety equipment is extended by three years, to 31 December 2029. Twelve more items are being added to the list of eligible equipment.
• The tax credit for Succession Farm Partnerships (SFPs) doubles from €5,000 to €10,000 for SFPs registered on or after 1 January 2027. The three-year holding period before succession can take place is also being removed. This applies only to applications made on or after 1 January 2027.

Pillar Two

Ireland’s Pillar Two legislation will be amended to implement the OECD Side-by-Side Package agreed in January, within the timeframes needed to satisfy the OECD peer review process. The package extends the Transitional Country-by-Country Reporting Safe Harbour and also introduces four new safe harbours, the Simplified Effective Tax Rate, Substance-based Tax Incentive, Ultimate Parent Entity, and Side-by-Side Safe Harbours. The amendments will also reflect the OECD Administrative Guidance published in May and September and update the Pillar Two penalty and filing provisions.

Carbon Tax and Mineral Oil Tax

The carbon tax increase on auto fuels, due to rise on 14 October 2026, is deferred to 1 May 2027, with a further increase on 13 October 2027, returning these fuels to the Finance Act 2020 trajectory of €100 per tonne of CO2 by 2030. The rate on kerosene and natural gas will be reduced to €48.50 per tonne until 2030. For Marked Gas Oil (MGO), the increase originally due on 1 May 2026 is deferred to 1 May 2027, and the increase due on 1 May 2027 is deferred to 13 October 2027. Minor fuels, including solid fuels, will follow a similar path, returning to the trajectory set by the Finance Act 2020 by 13 October 2027.

The phased restoration of the Mineral Oil Tax Non-Carbon Component (MOT NCC) rates for petrol, autodiesel, and MGO has been deferred. The full restoration amounts are 25 cents, 30 cents, and 5.4 cents per litre, respectively. The first increase takes place on 28 February 2027, when the MGO rate is fully restored. Petrol and diesel rates will rise further on 8 April 2027 and 1 May 2027, and will be fully restored on 30 June 2027.

Electric Vehicles

The Vehicle Registration Tax (VRT) relief for electric vehicles, due to expire on 31 December 2026, is extended by two years to 31 December 2028. From 1 January 2027, the Category A VRT percentage rates used to calculate the CO2 component of the charge will increase by 1 per cent for bands 3 to 20, which cover cars with CO2 emissions above 80g/km.

Employer PRSI

The Employer PRSI threshold will increase from €552 to €600 per week for 2027.

Enhanced Reporting Requirements (ERR)

Changes to ERR will be introduced in the Finance Bill, including an option for employers to either make monthly returns or continue with the current real-time reporting.

VAT Charity Compensation Scheme

The VAT Compensation Scheme for Charities, introduced in Budget 2018, partly refunds the VAT charities pay, based on their level of non-public funding. The annual fund was initially capped at €5 million and raised to €10 million in Budget 2024. It will increase to €15 million for 2027. Where total eligible claims exceed the cap, they are paid on a pro-rata basis.

Consultations and Initiatives

The Minister also flagged several initiatives that will be progressed in 2027. The ongoing review of Ireland’s tax regime for interest continues, along with a review of the wider taxation of retail investment, including the rate of tax, the deemed disposal rule and other administrative burdens on investors. A holistic assessment of enterprise grants, tax incentives and business development programmes will also be undertaken, taking account of the EU State Aid framework. Reviews will also be carried out of the “cycle to work” and “tax saver” schemes, and of the tax treatment of theatre production costs and supports for the night-time economy.

Rent-a-Room Relief

Rent-a-Room Relief provides an income tax exemption to individuals letting a room in their home. The exemption limit has increased from €14,000 to €16,000, allowing an individual to earn up to €16,000 tax-free. Where amounts in excess of €16,000 are earned, the individual is taxed on the total amount.

The Rent-a-Room Relief is being extended to include newly installed detached auxiliary dwellings between 32 and 45 square metres. This extension applies retrospectively from 27 July 2026 to align the relief with the revised planning rules introduced earlier this year.

Rent Tax Credit (RTC)

A RTC was introduced in 2022 for taxpayers who rent their principal private residence and are not in receipt of any State housing support. The RTC will be increased from €1,000 to €1,150 per year for individuals and from €2,000 to €2,300 per year for jointly assessed couples.

Help-to-Buy Scheme

The Help-to-Buy Scheme provides refunds of income tax and deposit retention interest tax to first-time purchasers of residential property. The maximum refund a first-time buyer can claim has increased from €30,000 to €35,000. This measure will apply with effect from 7 October 2026.

Residential Zoned Land Tax (RZLT)

RZLT applies to land zoned as suitable for residential development, that is not currently developed for housing. It applies at a rate of 3% of the land’s market value.

In 2026, landowners could apply to the relevant local authority to have their land within the scope of RZLT rezoned to reflect the genuine economic use, making it eligible for an exemption from RZLT. The RZLT exemption window will be extended again, allowing landowners to apply to local authorities for an RZLT exemption in 2027.

Derelict Property Tax

Local authorities can place properties within their jurisdiction on a register of ‘derelict sites’ in accordance with the Derelict Sites Act 1990. A ‘derelict site’ is defined as any land which materially detracts, or is likely to detract from the amenity, character or appearance of the land in its neighbourhood. Currently, local authorities can charge the owners of property on a derelict site register with a derelict site levy at 7% of the land’s market value.

In 2025, the Government announced that it would introduce a new derelict property tax to replace the derelict site levy. The new derelict property tax will be legislated for in this year’s Finance Bill and will be charged at a rate of 7%.

Local authorities will continue to identify and register derelict sites within their areas and will publish preliminary derelict property registers on 1 September 2027.

Taxation of Investments

A reduction in the rates of taxation applicable to certain investment products was announced and the key changes are as follows:

• The rate of investment undertaking tax will decrease from 38% to 35%.
• The life assurance exit tax rate applicable to policies issued by Irish-domiciled life assurance companies since 2001, will decrease from 38% to 35%.
• The tax rate on investments in equivalent offshore funds is being reduced from 38% to 35%. This covers funds located in the EU or EEA, or in an OECD member state with which Ireland has a double taxation agreement, that are treated as equivalent to Irish-domiciled funds, including equivalent offshore Exchange Traded Funds (ETFs). The Finance Bill will also introduce a new section on the taxation of investors in Irish-domiciled funds whose units are held in a recognised clearing system, including Irish ETFs. This section will bring these funds in line with the rules for other Irish-domiciled funds, with the 35% rate applying.
• The tax rate applicable to life assurance policies commenced after 2001 by companies, branches or agencies operating in qualifying jurisdictions (EU, EEA, or OECD member states which have a double taxation agreement with Ireland) will also be reduced from 38% to 35%.

Bank Levy

The Bank Levy will be extended in its current form for 2027, with a target yield of €200 million. AIB, EBS, BOI and PTSB remain liable, and the levy will again be split according to each bank’s eligible deposits at the end of 2024.

Simplification of Ireland’s Interest Regime

Following an extensive public consultation and review of Ireland’s taxation regime for interest, the upcoming Finance Bill will include several targeted amendments to simplify legislation governing interest relief and borrowings for certain lending and investment activities.