What Budget 2026 means for your business

What Budget 2026 means for your business

Budget 2026, announced last week, delivers a few surprises for SMEs, and even fewer new supports.

While the Government has emphasised continuity and fiscal prudence, for many business owners the reality is a significant tightening of conditions in the year ahead. Between higher wage costs, new pension obligations, and continuing administrative reforms, most businesses are likely to see margins squeezed further in 2026.

Key Tax and Income Measures

Income tax and credits remain unchanged from 2025, but the USC second band increases to €28,700, providing modest relief to lower earners.

The minimum wage will rise by 65 cents to €14.15 per hour, and the €400 income tax disregard for micro-generation of electricity is extended to the end of 2028.

The Rent Tax Credit continues at €1,000 for private renters until 2028, while retrofit deductions for landlords are also extended. Mortgage Interest Tax Relief remains available for two years, though it will taper in value during the final year.

While these measures may support households, for many small employers they represent additional outflows through payroll and compliance costs without matching relief.

Supports for Households and Communities

Social welfare payments will rise by €10 per week for most recipients, alongside a double week for long-term schemes. Other increases include child benefit, fuel allowance, carer's allowance and domiciliary care allowance detailed below.

These adjustments, combined with the double Christmas bonus, bring the Social Protection budget up by around €2 billion.

Child Benefit: +€8 (under 12) and +€16 (over 12) per week

Fuel Allowance: +€5 to €38 per week

Carer’s Allowance income disregard: up to €1,000 (single) and €2,000 (couples)

Domiciliary Care Allowance: up €20 to €380 per month

Business and SME Highlights

Measures include a consultation on withholding taxes, a new corporate deduction for apartment construction costs, and no corporation tax on profits from cost rental schemes. A new €1 billion market cap threshold will exempt smaller listed Irish SMEs from the 1% stamp duty on share transactions.

These are welcome for innovative or export-facing businesses, but for most domestic SMEs, they do not address the immediate challenges of rising wage bills, pension contributions, and tighter compliance obligations.

Budget 2026 continues targeted support for enterprise and innovation:

R&D Tax Credit rises from 30% to 35%, with an increased first-year payment threshold of €87,500.

KEEP and SARP reliefs are extended, with SARP’s qualifying income rising to €125,000.

Foreign Earnings Deduction extended and increased to €50,000.

The Digital Games Tax Credit is extended to 2031 with a broader scope.

Film Tax Credit enhanced to 40% for qualifying VFX work.

Capital Taxes and VAT

Entrepreneur Relief: Lifetime limit rises from €1 million to €1.5 million (from January 2026).

Residential Development Stamp Duty Refund Scheme: extended to 2030.

VAT Cuts:

Café, restaurant, and hairdressing rate reduced to 9% from July 2026.

New-build apartments: 9% VAT rate from October 2025 through 2030.

Gas and electricity: 9% VAT rate extended to 2030.

Climate and Transport

Carbon tax increases to €71 per tonne from October 2025 for petrol and diesel, and from May 2026 for other fuels.

For businesses and employees:

VRT relief on electric vehicles extended to 2026.

Company car BIK relief continues on a tapering basis until 2029, after which it will be abolished.

A new zero-emission vehicle category will attract the lowest BIK rates.

These steps reinforce the long-term transition to cleaner transport but add another layer of adjustment for companies managing vehicle fleets.

Public Spending and Investment

Health:

€27.4 billion allocation (+€1.5 billion), supporting 3,300 new staff, 250 acute beds, and 1.7 million extra home support hours.

Housing:

€11.3 billion allocation, including €7.2 billion for new social and affordable homes and €1.2 billion for Help-to-Buy and starter home supports.

Education:

Over 3,600 new education posts, €1.6 billion for school buildings, and a €500 permanent reduction in third-level student fees.

Childcare:

€125 million more funding to create 2,300 new places.

Infrastructure & Other Spending:

Major projects include BusConnects, Adare Bypass, and the M28 route in Cork, along with investment in utilities, broadcasting, and regional development.

A Budget Focused on Stability

Budget 2026 signals a move away from once-off cost-of-living measures toward a long-term, capacity-building approach. With higher labour costs, auto-enrolment, and further Revenue digitalisation on the horizon, most SMEs will find 2026 a year of consolidation rather than growth.

While the Government’s approach may strengthen long-term fiscal resilience, many small businesses will be left navigating tighter margins, higher compliance workloads, and limited direct relief in the meantime.

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