Budget Highlights: Tax Changes You Should Know

Every October, the Government sets out its spending plans and announces the tax measures that shape the year ahead. For business owners in Limerick and across Munster, the question is always the same: what does this actually mean for my payroll, my prices, and my bottom line? Budget tax changes rarely land all at once: some apply on budget night, some from 1 January, others mid-year. Sorting the noise from the measures that genuinely affect you is where a good accountant earns their keep.

This guide walks through the most business-relevant tax changes from Budget 2026, announced in October 2025, with the bulk of measures effective from 1 January 2026. We will keep it practical, point you to official sources, and flag the dates that matter. It is a world away from the COVID-era reliefs of Budget 2022; the focus now is steady support for enterprise.

What budget tax changes should Irish businesses pay attention to this year?

Budget 2026 was a steady budget rather than a dramatic one. There were no headline cuts to income tax rates or tax credits, but several targeted measures will affect employers, owner-managers, and the self-employed. Here is the quick overview of what changed versus what was extended or confirmed.

• Extended or confirmed: the Rent Tax Credit, mortgage interest tax relief (on a tapered basis), reduced VAT on gas and electricity, the reduced USC rate for certain medical card holders, and the 12.5% corporation tax rate.
• Newly changed: a higher USC 2% rate band, a cut in VAT for food, catering and hairdressing, a new benefit-in-kind (BIK) category for electric vehicles, and an increase to the Research and Development (R&D) tax credit.

Who does this impact? Pretty much everyone running a business: employers updating payroll, owner-managers watching USC and PRSI, SMEs investing in innovation, and anyone with a company car or van fleet. The Universal Social Charge (USC), the charge applied to most income on top of income tax, sits at the centre of the payroll changes. For the definitive plain-English summary, the Citizens Information Budget 2026 page is the best starting point, with Revenue's own Budget 2026 information hub for the technical detail.

How do the budget income tax changes affect employers and owner-managers?

Here is the honest position: Budget 2026 did not change income tax rates, and there are no changes to tax credits for 2026 either. The personal, employee, and earned income credits that flow through your payroll stay where they were. That sounds like a non-event, but the cost of employing people still shifts through other levers.

The national minimum wage rises by €0.65 to €14.15 per hour from 1 January 2026. For publicans, retailers, and any business with staff on or near the minimum wage, that feeds directly into your wage bill. The Government also confirmed that full-time workers on the minimum wage will remain outside the higher rates of USC, achieved through the USC band adjustment below rather than a credit change.

For owner-managers extracting income via salary, the absence of band and credit changes means your take-home calculation is broadly stable year on year, much as it was through 2024 and 2025. The salary versus dividend question still deserves an annual review, but the better conversation is a tailored one that looks at your company's profits, your pension funding, and your wider plans.

What are the latest income tax bands and credits businesses should know?

Because there were no changes to the standard rate band or the main credits in Budget 2026, the 2025 figures carry through into 2026, which is useful for forecasting. The one moving part on the deductions side is USC. The rates table below gives the headline numbers, but always confirm against Revenue's published rates first.

What USC and PRSI changes were announced, and how will they impact payroll?

This is where the real payroll action sits. Two charges, USC and PRSI, both moved, and both need attention before your first 2026 pay run.

On USC, the ceiling for the 2% rate band increases to €28,700 from 1 January 2026, up from €27,382. More of a worker's income is taxed at the lower 2% USC rate rather than tipping into the higher rate, which keeps minimum wage earners out of the higher USC bands as the minimum wage rises. There is also a useful concession: the reduced rate of USC for a full medical card holder earning less than €60,000 a year is extended for two further years, to the end of 2027. It is a reduced rate rather than an exemption, but it continues to apply if you employ a full medical card holder.

On PRSI, short for Pay Related Social Insurance, there is a phased programme of increases working through the system. The rate rose by 0.15 of a percentage point from 1 October 2025, with further increases scheduled to help fund the State pension as the population ages. The change is small per pay packet, but as an employer it lifts your PRSI cost across your whole headcount, so model it.

Before your first 2026 pay run, update your payroll software for the new USC 2% band ceiling of €28,700, re-budget your employer PRSI cost, check the treatment for directors and anyone on irregular pay patterns, and tell staff about any take-home changes so there are no surprises in January.

How do USC/PRSI changes differ for employees vs self-employed?

Employees pay USC and PRSI through PAYE, with the employer paying employer PRSI on top, while the self-employed (including many owner-managers and sole traders) pay Class S PRSI through annual self-assessment and preliminary tax. The pitfall for the self-employed is under-providing for the year, so factor the rate increase into your preliminary tax rather than discovering it at filing time. If you are unsure which side a director or contractor falls on, confirm that classification early, because it changes both the rate and the timing.

What are the key corporation tax changes businesses need to know?

The headline first: Ireland's 12.5% corporation tax rate continues to apply to most trading companies, and the 15% rate applies to large groups with annual turnover above €750 million. Budget 2026 changed neither rate, which is the stability most Irish SMEs and their advisers want to hear.

The most significant business-friendly change sits in innovation support. The Research and Development (R&D) tax credit increases from 30% to 35% of qualifying expenditure, and the first-year payment threshold rises from €75,000 to €87,500. For a company carrying out genuine R&D, that is a meaningful uplift in the relief against your effective tax rate, and the higher threshold improves cashflow for smaller claimants. The detail is on Revenue's R&D Corporation Tax Credit page. The practical action is to forecast the credit's impact, review provisioning for accounting periods (years to 31 December for most companies) that straddle the change, and keep contemporaneous documentation, because the relief lives or dies on the quality of your records.

Are there any corporate tax measures aimed at SMEs specifically?

Yes, the enhanced R&D credit is the standout one for ambitious smaller companies, and the higher first-year payable threshold of €87,500 particularly helps SMEs that want the relief paid as cash rather than carried forward. Eligibility hinges on the work meeting Revenue's definition of qualifying research and development, so if you might qualify, document the question you were resolving, keep records, and get advice before you file. The Chartered Accountants Ireland summary of the business tax measures in Budget 2026 is a useful reference.

What VAT changes were included in the budget, and what should businesses do next?

VAT, short for Value Added Tax, saw some of the most concrete changes in Budget 2026, several of them sector-specific. If you are in hospitality, food, or personal services, read on.

• Food, catering and hairdressing: the VAT rate falls from 13.5% to the 9% reduced rate from 1 July 2026, a significant cut for restaurants, cafés, takeaways, and hairdressers, many of them owner-run businesses across Limerick.
• Gas and electricity: the 9% reduced rate on household gas and electricity bills is extended to 31 December 2030.
• Completed apartments: the VAT rate on the sale of completed apartments is reduced to 9% from 13.5%, applying from 8 October 2025 to 31 December 2030 to support housing supply.

The cashflow and pricing implications are real: a VAT rate change alters the margin on every sale, the figures on your invoices, and the VAT codes in your software. The compliance actions are to update VAT codes and point-of-sale settings on the commencement date, decide whether to pass the saving to customers or keep it as margin, and review quotes and contracts that span the change date.

How should businesses handle VAT rate changes for invoices around the effective date?

The key concept is the tax point, broadly the date the supply takes place rather than the date you raise the invoice. For supplies straddling 1 July 2026, the rate depends on when the goods or services were actually supplied, so a supply completed in June at 13.5% should not be re-rated just because the invoice issues in July. Credit notes and returns follow the rate of the original supply, so keep a clean audit trail, and if you have deposits or staged payments crossing the date, take advice.

What business tax measures were announced beyond the big three?

Income tax, corporation tax, and VAT get the headlines, but Budget 2026 also moved several measures that hit fleets and remuneration, so if you run company cars or vans, these matter.

On benefit-in-kind (BIK) for company cars, the temporary €10,000 reduction to the Original Market Value (OMV) used in the BIK calculation continues for 2026, then tapers (€5,000 in 2027, €2,500 in 2028) and ends in 2029. The built-in taper matters for any multi-year fleet decision.

For electric vehicles, the news is positive. A new A1 category is created for zero-emission cars from 1 January 2026, with BIK charged at a preferential 6% to 15% of OMV depending on business mileage. An A1 electric car also qualifies for the €10,000 OMV reduction plus an additional €20,000 OMV reduction for 2026, materially lowering the taxable benefit. The €5,000 VRT relief (Vehicle Registration Tax, paid when a vehicle is first registered in Ireland) for electric vehicles is also extended to 31 December 2026. Together these reduced BIK rates make EVs a sharper proposition for fleet buyers.

Two personal reliefs are worth flagging because staff and directors will ask about them. The Rent Tax Credit is extended for 2026, 2027 and 2028, worth €1,000 for a single person and €2,000 for a jointly assessed couple. Mortgage interest tax relief is extended on a tapered basis, with a maximum credit of €625 per property for 2026; the previous arrangement had been due to end on 31 December 2025.

The table below pulls the key business-relevant Budget 2026 figures into one place. Always confirm against official Revenue figures before you act.

How do company vehicle tax changes affect fleet and remuneration planning?

The taxable benefit on a company car or van is reported through payroll each period, so the new A1 category and the OMV reductions make electric vehicles meaningfully cheaper to provide as a benefit in 2026, worth weighing when you review car allowances and EV policies. Because the BIK OMV reduction tapers from 2027 and the VRT relief runs to 31 December 2026, the cost of ownership shifts depending on when you buy or lease.

When do the budget tax changes take effect, and how should businesses plan implementation?

The most useful habit after any budget is to map each measure to its commencement date, because they do not all take effect together. Payroll measures apply from 1 January 2026, the food and hairdressing VAT cut starts 1 July 2026, the apartment VAT change ran from October 2025, and several reliefs run to 31 December 2030. A simple checklist by function keeps it controlled:

• Payroll: update USC bands, employer PRSI, the minimum wage, and BIK settings.
• Finance and tax: forecast the R&D credit and corporation tax position, and re-point VAT codes ahead of 1 July 2026.
• Procurement and fleet: factor the BIK taper and VRT relief end date into vehicle decisions.

After budget night, watch for the published Finance Bill, then Revenue guidance and commencement orders. An announcement is an intention; enactment is the rule you file under.

Where can businesses find the official budget tax rates, bands, and summaries?

Stick to primary sources and you will not go far wrong. Two are essential: Revenue's Budget 2026 summary and information hub for the technical detail and official figures, via the Revenue Budget 2026 page; and the Department of Finance announcements, including the Minister's Budget 2026 statement on gov.ie, for context and commencement timing.

When you read them, confirm the effective date for each measure, and check whether it is enacted or still only proposed, because the Finance Bill can change the fine print. A practical tip is to keep a simple internal budget changes register: a one-page tracker listing each measure, its rate, its commencement date, and the action taken. It is a lifesaver if Revenue ever asks how you handled a mid-year VAT change.

FAQs about budget tax changes for Irish businesses

Which budget tax changes impact payroll the most?

The biggest payroll impacts from Budget 2026 are the higher USC 2% rate band, the increased PRSI rate, the minimum wage rise to €14.15, and the BIK rules for company cars. None individually is dramatic, but together they change both your employer cost and your employees' take-home pay, so reflect all four in payroll before the first run of 2026.

Do budget announcements apply immediately, or only after the Finance Bill?

It depends on the measure. Some, such as certain VAT and excise changes, can apply from budget night, while most income tax, USC, and PRSI changes take effect from 1 January. The detail is enacted through the Finance Bill, so an announcement is a statement of intent until the legislation passes. Always confirm the commencement date first.

What should small businesses do first after budget night?

Prioritise three things: update payroll for the new USC band, PRSI, and minimum wage; check your VAT rate setup ahead of the move to 9% for food and hairdressing from 1 July 2026; and forecast your corporation tax and R&D position. Then build your budget changes register.

How do VAT changes affect contracts and invoices already issued?

The rate is generally determined by the date of supply rather than the invoice date, so a supply completed before a rate change keeps the old rate even if invoiced afterwards. Credit notes and returns follow the original rate. For deposits or staged payments crossing a change date, take advice and keep a clear audit trail.

Where can I check current Irish tax rates and thresholds after the budget?

Use Revenue's official Budget 2026 summary and rates pages for the definitive figures, and the gov.ie Department of Finance announcements for context and timing. Reputable rates tables help for a quick look, but confirm anything you act on against the latest Revenue guidance, because figures can be refined as the Finance Bill progresses.

Want help understanding how these budget tax changes affect your business?

Budgets are easy to read and surprisingly hard to apply, especially when measures take effect on different dates and the fine print only settles once the Finance Bill passes. At Coffey & Co. in Limerick, we give you a tailored impact review covering your payroll (income tax, USC and PRSI), your corporation tax forecast and any R&D relief, and your VAT and pricing updates.

You are in control of these decisions; our job is to make them clear. We can prepare a budget impact summary for your business type, whether you are a publican facing the 9% hospitality VAT change, a retailer managing minimum wage costs, a farmer reviewing reliefs, or an owner-manager weighing up salary, pension and dividends. For a consultation, have your payroll headcount, VAT rate setup, and latest management accounts ready. To find out exactly what Budget 2026 means for your numbers, get in touch with our Limerick team through the Coffey & Co contact page.

The information in this blog is provided for general informational purposes only and does not constitute accounting, tax, business, or legal advice. While Coffey & Co aims to ensure the content is accurate and up to date, no guarantee is given regarding its completeness or suitability for any particular purpose.