Budget 2026 Insights

Budget 2026. Income Tax. Personal Taxation. Analysis of Income Tax Reliefs and Excemptions.

Today, Tuesday, 7^th October 2025, the Minister for Finance, Paschal Donohoe and the Minister for Public Expenditure, Infrastructure, Public Service Reform & Digitalisation, Jack Chambers presented Budget 2026.  In this series of articles, we have outlined some of the tax changes that we consider most relevant under the following headings (a) Personal Tax, (b) Business Taxes, (c) VAT, (d) Housing/Property, (e) Agri-taxation, (f) Investments and (g) Global Mobility and Employment.

PERSONAL TAX

• Unlike in previous recent Budgets, there were no increases to the income tax rate bands and tax credits announced in Budget 2026.  However, there will be a reduction in the tax rate, from 41% to 38%, in relation to certain investments including Exchange Traded Funds (ETFs), certain Irish domiciled funds, certain life assurance policies, equivalent offshore funds and certain foreign life assurance policies

• The reduced Universal Social Charge for qualifying medical card holders will be extended until 31^st December 2027.  This applies to medical card holders earning less than €60,000 per year.  This ensures that such individuals continue to pay a reduced USC rate of 0.5% on the first €12,012 of their income with 2% on the balance.

• From 1^st January 2026, the National Minimum Wage will increase to €14.15.  The 2% USC rate band will increase from €27,382 to €28,700.  This means that the salary of a full-time employee on the minimum wage will remain outside the 3% rate of USC.  Incomes of less than €13,000 continue to remain exempt from USC.

• The Rent Tax Credit (RTC), which was due to expire on 31^st December 2025, has been extended for three more years to 31^st December 2028.  The maximum value of the RTC will remain at €1,000 for single individuals and €2,000 for jointly assessed couples or civil partners.

• Mortgage Interest Relief has been extended to 31^st December 2026. It will remain at current levels for 2025, however, it will reduce by 50% for 2026.  As you’re aware, this tax credit can be claimed for taxpayers who have made increased mortgage interest payments in relation to a qualifying loan for a principal private residence in 2025 when compared to 2022. For 2025 the relief is capped €6,250 per property.  This equates to a maximum tax credit of €1,250.  For 2026, the maximum tax credit of €625 will be available, based on the increase in interest paid in 2026 as compared to the mortgage interest paid in 2022.  There is no change to the qualifying criteria and the relief remains available to homeowners with an outstanding mortgage balance of between €80,000 and €500,000, as of 31^st December 2022.

• The Finance Bill 2025 will include additional amendments to the tax treatment for the Auto Enrolment (AE) Retirement Savings Scheme which will address the tax treatment of AE retirement savings on the participant’s death as well as exempt AE provider schemes from Investment Undertaking Tax and exempt employer AE contributions from USC.

• For, households that sell electricity back to the grid from micro-generation, the Income Tax relief that exempts income of up to €400 per annum, is extended, for three years, up to 31^st December 2028.

• As you may remember, in Finance Act 2023, a temporary universal reduction to the Original Market Value of some vehicles for the purposes of calculating BIK was introduced.  This temporary universal relief of €10,000 applied to the Original Market Value of vehicles in Category A to D.  Budget 2026 extended this Benefit-in-Kind Relief by one year i.e. this relief will remain at €10,000 for 2026.  It will then reduce to €5,000 in 2027 and €2,500 in 2028.  It will be abolished from 2029.

• From 1^st January 2026, there will be a new vehicle category (A1) for employer provided vehicles with zero-emissions, for Benefit in Kind purposes.   It will apply with BIK rates of between 6% to 15% from 2026, depending on business mileage.  Where an employee undertakes high business mileage, the lower threshold of the upper mileage band will be permanently reduced from 52,001km to 48,001km.

• Finally, for those involved in the manufacture of Uilleann Pipes and Irish Harps, the exemption from Income Tax of a maximum profit of €20,000 generated from the manufacture, maintenance and repair of uilleann pipes and early Irish harps is being extended for three years to 31^st December 2028.

For further information, please click: https://www.gov.ie/en/department-of-public-expenditure-infrastructure-public-service-reform-and-digitalisation/publications/your-guide-to-budget-2026/

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.