Minister for Finance Paschal Donohoe has described Budget 2026 as a forward-looking package designed to protect jobs, support long term investment and reinforce economic stability during a period of global uncertainty. Delivering the first Budget of the Government’s new term, the Minister said the measures announced aim to strengthen Ireland’s resilience while addressing major national challenges, particularly in housing and infrastructure.
Economic Outlook and Fiscal Position
The Minister outlined a positive economic outlook, with Modified Domestic Demand expected to grow by 3.3 percent this year and 2.3 percent in 2026. Approximately 63,500 additional jobs are forecast to be created by year end, while inflation is expected to remain close to 2 percent next year.
Mr Donohoe said Ireland’s public finances remain on a solid footing. The Government surplus is projected at €10.2 billion this year and €5.1 billion in 2026. Long term savings held in the Future Ireland Fund and the Climate and Nature Fund are expected to reach €24 billion by the end of 2025 and €40 billion by the end of the Government’s term.
€9.4 Billion Budget Package
The overall Budget package remains at €9.4 billion, in line with the Summer Economic Statement. However, the tax component has been reduced to €1.3 billion, €150 million below earlier plans, to allow for increased targeted supports. Public spending will total €8.1 billion.
Minister for Public Expenditure Jack Chambers confirmed that current spending will rise by €6.1 billion and capital spending by €2 billion. This includes more than €2 billion for social protection, €1.5 billion for health, €1.2 billion for public sector pay adjustments and €1.4 billion in wider supports. The measures will support an additional 12,500 public service staff, including more than 3,370 in health, 2,600 in education and up to 1,000 new gardaí.
A €1 billion contingency reserve will also be set aside for unexpected expenditure pressures and for Ireland’s upcoming EU Presidency.
Housing and Property Measures
Housing remains central to the Budget, with more than €5 billion in capital investment planned for 2026. Key measures include:
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€200 million in additional external funding for Home Building Finance Ireland to support developers
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VAT on completed apartments reduced from 13.5 percent to 9 percent until the end of 2030
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Residential Zoned Land Tax extended to allow landowners additional time to regularise zoning status
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Cost Rental Scheme profits exempt from corporation tax
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New enhanced corporation tax deduction for certain construction and conversion costs related to apartment developments
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Derelict Property Tax introduced, replacing the current Derelict Sites Levy, with legislation due next year and implementation after 2027 registers are published
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Living City Initiative extended to 2030, expanded to include homes built before 1975, with increased support for converting over-the-shop premises
The Residential Development Stamp Duty Refund Scheme will also continue until 2030, with time limits for commencement and completion extended from 30 to 36 months for large scale projects.
Taxation and Income Measures
The Minister confirmed that there is limited scope for major personal tax reform this year. Key measures include:
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Minimum wage increased by 65 cent to €14.15 per hour from January 2026
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USC 2 percent band increased by €1,318 to €28,700, ensuring full time minimum wage earners remain outside higher USC rates
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Rent Tax Credit extended to the end of 2028
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VAT rate for food, catering and hairdressing reduced to 9 percent from July 2026
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Mortgage Interest Tax Relief extended for two more years, with a lower value in the final year
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R&D tax credit increased from 30 percent to 35 percent, and the first-year payment threshold raised to €87,500
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An action plan to reform interest taxation will be published
Energy, Climate and Carbon Tax
Carbon tax will increase to €71 per tonne of CO₂. The new rate applies to motor fuels from tomorrow and to all other fuels from 1 May 2026.
Revenue from the tax, expected to reach €121 million next year and €157 million in a full year, will remain ring fenced. Funding will support social welfare measures, energy poverty supports, the national retrofitting programme and incentives for sustainable farming.
Other climate and energy announcements include:
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€5,000 VRT relief for EVs extended to the end of 2026
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Excise duties on cigarettes increased by 50 cent per pack
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€3.5 billion committed to ESB and EirGrid for energy security and grid modernisation
