Like Christmas, budget day seems to come around faster and faster each year.
It’s now just a few short weeks before the Government – and returning Minister for Finance Paschal Donohoe – will set out how they are going to spend the exchequer’s tax revenues.
This year, Tuesday, October 7th will be the big day. But unlike in previous years, there has been less talk and fewer budget kites flying.
“There is less speculation and leaks than other years,” says Katie O’Neill, a tax director with PwC, adding: “Maybe it’s because there’s less money available.”
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There’s no doubting that Budget 2026 is taking place against a background of global uncertainty. As Alison McHugh, tax partner and head of private client services with EY, notes, while we may be approaching the budget from a position of strength, given the challenges in the world, “it’s going to be a prudent budget”.
The summer economic statement indicated that there would be a package of about €9.4 billion set aside for budget measures. Of this, €1.5 billion will be earmarked for tax reductions and almost €8 billion for increased spending. While this is more than last year’s package (€8.3 billion), tax measures are on a par with 2025’s budget.
The focus is expected to be on job protection and creation, and competitiveness – so those expected cuts to hospitality VAT will likely be a priority. But what will this leave available to help salve the ever increasing costs facing households?
Cost of living payments
Having been a feature of recent budgets – last year for example, all electricity customers got €250 towards their bills – expectations are that universal cost of living payments have now come to an end.
“One thing we won’t see is one-off cost of living payments,” says O’Neill.
This was confirmed during the summer by Minister for Public Expenditure Jack Chambers, although there is still talk of more modest, targeted measures.
[ Tax and spending package of €9.4bn to form basis of Budget 2026Opens in new window ]
Increases in the standard rate band of tax have been a feature of recent budgets – something which has kept the personal taxation system somewhat in line with inflation.
“It did really help,” says O’Neill. So, if there is change on the income tax front, it’s unlikely it will be to the rates (currently 20 per cent and 40 per cent) – but rather further indexation of the standard rate band.
However, while “indexing credits and bands to prevent an increase in the real burden of income tax, as stated in the Programme for Government, is a priority, this will only be on the cards “if the economy remains strong”.
And, while this may be true at the moment, O’Neill notes that Government will have “one eye on the future and a potential downturn”.
Broadening the standard rate band isn’t cheap; a €1,000 increase, for example, will cost €265 million a year.
Similarly, if there are changes to the universal social charge, it is expected that it will involve a broadening of the bands, rather than a rate cut, “to try and help those people around the average wage”.
Increasing the 2 per cent band by €500, for example, will cost €33 million a year.
[ What did the summer economic statement really tell us about Budget 2026?Opens in new window ]
Increasing tax credits may also be a possibility – but again will cost. Indexing the personal tax credit by 1 per cent, for example, will cost €188 million a year, according to Revenue figures.
And keeping track with inflation will require – as McHugh notes – a 4 per cent increase in the various tax credits and bands which would cost about €1.1 billion.
Workers also need to bear in mind that Pay Related Social Insurance (PRSI) is set to rise again this October – up from 4.1 per cent to 4.2 per cent.
Another key bone of contention is the “temporary” Universal Social Charge (USC) surcharge of 3 per cent on incomes of €100,000 and over, which many see as being inequitable. However, it has been here so long now, it may be a permanent fixture by this point.
Housing
While take-up may have been slow when it was first introduced, many renters may now rely on the rent tax credit, which offers savings of up to €1,000 a year on rent payments. In 2022, almost 275,000 taxpayers benefited from it, at a cost of €156 million.
But the credit, scheduled to end in December, is currently the subject of a Department of Finance review, with a report expected before the budget.
According to O’Neill, it is likely to be extended – at the least, “and we would like to see an increase in that,” she says.
The Programme for Government did commit to “progressively increase the Rent Tax Credit”. Estimates suggest that a €100 increase in the credit would cost €25 million annually, or €115 million for a €500 increase.
For those on the other side of the equation, renting out properties, this will be the first year that landlords get to claim the new Residential Premises Rental Income Relief, on a retroactive basis for 2024.
“It would be very welcome if there was an increase for smaller landlords,” says O’Neill.
For those looking to buy, the main goal will be to increase the supply of housing. The Help to Buy scheme is due to run until 2029. But might it be increased? The threshold for qualifying currently stands at a sale price of €500,000.
“It has been effective in helping people get on the property ladder,” says McHugh, though she notes the ceiling on properties that qualify has remained at the current level since 2017, and it is difficult for buyers to find a new home at that price level, particularly in Dublin.
As such, this ceiling “may well go up” come budget day.
Inheritance tax
A change to the tax free thresholds on inheritance (currently at €400,000 for parent to child transfers) is something there is always a clamour for come budget day.
“It’s a bigger focus for people now, because the CAT rate is quite high,” says McHugh, adding that part of the interest is because “parents who have money to spare want to help their children in their lifetimes”.
[ Will inheritance tax be cut again in the budget?Opens in new window ]
McHugh also argues that a review of the thresholds in the context of individuals with no children would also be timely.
“A lot of our clients have accumulated wealth but have no children of their own,” she says, noting that a threshold of just €40,000 applies if they wish to leave their money to another relative or a friend.
“It’s a really relevant topic,” agrees O’Neill, noting that, with smaller families, people want to make sure that their children can inherit the (typical) family home tax-free.
Last year, the parent to child threshold increased by €65,000, “the largest increase we’ve seen in quite some time” says O’Neill.
McHugh would also like to see an increase to the small gift exemption, which currently stands at €3,000. “It’s a very valuable relief,” she says, noting that it is often used by grandparents who want to help parents with school and college fees.
“It’s been €3,000 since 2003. That’s a long time with no change,” she says, adding that the cumulative effect of the relief if gifts are made over a period of time is “definitely beneficial”.
Capital gains
A reduction in capital gains tax, currently at 33 per cent, would be “very welcome” says O’Neill, noting that Ireland has one of the highest CGT rates in Europe.
McHugh agrees, noting that, in the UK, it is 28 per cent and 18 per cent for some things.
“A reduction in the rate would drive activity,” she says, adding that a simplification, or a relaxation of more onerous conditions when claiming entrepreneur’s relief, would also be welcome.
