With Budget 2026 set to be unveiled shortly, several major policy decisions are expected to shape the year ahead. Below is an overview of ten areas likely to draw significant attention during the Ministers’ speeches.
1. Income Tax Bands
One of the most significant developments is expected to come in personal taxation. Wage growth is averaging around 5 percent, yet the Minister for Finance has confirmed that tax bands will not be adjusted for 2026. This means workers receiving pay increases may move into higher tax brackets, increasing their overall tax bill. Indexing the bands would cost an estimated €1.3 billion, leaving limited room for other tax reductions.
2. VAT Reduction for Hospitality
A major tax cut is expected for hospitality businesses, with the VAT rate for food, catering and related services likely to fall from 13.5 percent to 9 percent. The measure would support cafés, restaurants, catering firms and fast-food outlets. Implementation from July rather than January would halve the 2026 cost to the Exchequer. While the move is seen as essential by many domestic businesses, it would also benefit multinational chains operating in Ireland.
3. Tax on Gas and Electricity
Despite continued pressure from high household energy bills, the Government is not expected to announce new one-off supports. Instead, the existing 9 percent VAT rate on gas and electricity invoices is likely to be extended again rather than reverting to 13.5 percent.
4. Housing Measures
Housing remains the Government’s top priority, particularly after a sharp downturn in apartment construction last year. A reduction in the VAT rate on apartment sales to 9 percent is expected to encourage new high-density development. Senior ministers have also highlighted forthcoming measures targeting vacancy and dereliction.
5. Rent Tax Credit
The annual rent credit currently stands at €1,000 for individual renters and €2,000 for jointly assessed couples. The Government has committed to increasing this credit over time, so an enhancement in Budget 2026 is expected.
6. Minimum Wage
With grocery inflation still elevated, minimum wage earners are under financial strain. The Low Pay Commission is understood to have recommended an increase of 65 cent per hour, which would bring the minimum wage to €14.15. This will be an important measure for roughly 200,000 workers, many of whom are women, young people and workers with disabilities.
7. USC and Employers’ PRSI
Any increase in the minimum wage is likely to be matched by changes to the Universal Social Charge to ensure lower-paid workers do not fall into higher USC bands. Adjustments to Employers’ PRSI thresholds are also expected to prevent minimum wage workers from tipping into the higher 8 percent rate.
8. Social Welfare Increases
Last year’s Budget included a €12 weekly increase for many social welfare recipients. To keep pace with inflation, similar increases may be included again in Budget 2026.
9. Supports for Carers
Carer’s allowance has become a major political focus. While opposition parties want the means test removed entirely, the Government has committed to phasing it out gradually. Budget 2026 may include higher income disregards to expand eligibility.
10. Overall Government Spending
The total proposed spending increase for Budget 2026 stands at €9.4 billion. Of this, €5.9 billion is earmarked for current expenditure, €2 billion for capital investment and €1.5 billion for taxation measures. However, expected VAT reductions for hospitality, apartment sales and energy could limit the space for additional tax cuts. Several economic bodies, including the Central Bank and the Irish Fiscal Advisory Council, have expressed concern that the overall spending increase may be too high.
