Budget 2026 – Key announcements and how businesses are impacted

On Tuesday 7 October 2025, the government unveiled a bold Budget 2026. The headline announcements came in the form of leveraging some of Europe's strongest public finances to slash business taxes, attract foreign investment and boost overstretched public services and infrastructure.

The enhancements to the R&D tax credit, entrepreneur relief and foreign earnings deduction will be particularly relevant to SME and multinationals seeking to innovate, expand internationally or restructure. The extension of KEEP (Key Employee Engagement Programme) and SARP (The Special Assignee Relief Programme) schemes will support talent attraction and retention, especially for high growth and internationally active businesses.

VAT reductions across key sectors such as food, catering and hairdressing, alongside targeted reliefs for electric vehicles, signal a continued policy focus on cost-of-living pressures and sustainability—areas where key sectors and markets are increasingly seeking strategic advice.

Meanwhile, broader measures such as the bank levy, tobacco excise and compliance initiatives reflect the government’s intent to balance fiscal support with revenue generation and enforcement. These developments will require careful interpretation and proactive engagement to ensure compliance and optimal tax planning.

Budget 2026 also introduced a comprehensive set of tax measures to tackle Ireland’s housing crisis by improving affordability, boosting supply and encouraging urban regeneration. Key initiatives included a VAT reduction to 9% on new apartments and enhanced corporation tax deductions of up to €50,000 per unit to incentivise construction.

A corporation tax exemption for cost rental income supports the goal of delivering 18,000 affordable rental homes by 2030. Extensions to the stamp duty refund scheme and Living City initiative promote urban renewal, while new taxes on derelict properties and zoned land aim to activate underused sites. Together, these policies reflect a strategic, multi-pronged approach to housing reform.

1. VAT measures

• Food, catering and hairdressing: VAT reduced from 13.5% to 9% (from 1 July 2026)
• New apartments: VAT reduced to 9% (from 8 Oct 2025 to 31 Dec 2030)

2. R&D tax credit enhancements

• Rate increased from 30% to 35%
• First-year payment threshold raised to €87,500
• Simplified admin: 100% of emoluments qualify if over 95% of time is spent on R&D

3. Participation Exemption for foreign dividends

• Expanded scope to include more jurisdictions
• Residency requirement reduced from 5 to 3 years
• Clarification: Shareholding acquisition not considered a business asset

4. CGT – Entrepreneur relief

• Lifetime limit increased from €1 million to €1.5 million

5. Stamp duty exemption for share acquisitions

• New exemption for listed shares in Irish companies with market cap below €1 billion
• Existing exemption for Euronext Growth market shares removed

6. KEEP

• Extended to 31 December 2028, subject to EU approval

7. SARP

• Extended to 2030
• New salary threshold: €125,000 minimum for new entrants
• 30% income tax exemption: Applies between €125,000 and €1 million

8. Foreign Earnings Deduction (FED)

• Extended to 2030
• Relief cap increased to €50,000
• New qualifying countries: Philippines and Türkiye

9. Capital allowances for intangible assets

• Amendments to balancing allowances for IP-related assets.
• Deduction remains capped at 80% of relevant trading profits.

10. Benefit-in-kind (BIK) relief

• €10,000 BIK deduction on the original market value of employer-provided electric vehicles:
  • 2026: €10,000
  • 2027: €5,000
  • 2028: €2,500
• Mileage band adjustment: Lower limit of highest band reduced from 52,001km to 48,001km from 1 January 2026
• Category A1 introduced with reduced BIK rates (6-15%), depending on business mileage

11. Investment product rate change: 

• Offshore funds/ETFs rate change 41% > 38% (although no mention of when this will take effect)

1. VAT on new apartments

• Reduced from 13.5% to 9% for sales from 8 October 2025 to 31 December 2030
• To improve affordability and boosting apartment construction

2. Corporation tax exemption for cost rental income

• Exemption: Profits from designated cost rental properties will be exempt from corporation tax
• 25% below market rate rent: Supporting delivery of affordable housing

3. Enhanced corporation tax deduction for apartment construction

• 125% of qualifying construction costs can be claimed by developers, capped at €50,000 per unit
• Projects of 10 plus apartments are applied to, including conversions from 8 Oct 2025 to 31 Dec 2030.

4. Living City initiative

• Extended to 31 December 2030 and expanded to include: 
• Properties built before 1975
• Commercial-to-residential conversions (no age restriction).
• Increased relief cap for enterprises from €200,000 to €300,000
• New areas added are Athlone, Drogheda, Dundalk, Letterkenny and Sligo

5. Residential development stamp duty refund scheme

• Extended to 31 December 2030
• Refunds available for land developed for residential use, with updated conditions to reflect modern planning practices

6. Retrofitting relief for landlords

• Extended to 31 December 2028
• Applies to up to 3 properties and can be claimed in the year of expenditure

7. Derelict property tax (DPT)

• New tax replacing the derelict sites levy
• Collected by revenue; aims to incentivise reuse of vacant properties
• Expected to be legislated in Finance Bill 2026, with implementation starting 2027

8. Residential zoned land tax (RZLT)

• Additional opportunity for landowners to request zoning changes.
• Exemptions introduced for lands under planning appeals and other technical amendments.

Revenue Commissioners’ compliance measures

• Revenue to conduct targeted compliance activities in 2026