Shaping the Future Beyond Budget 2026 with EY

National Minimum Wage

“The increase in the national minimum wage is necessary to keep money in the pockets of those workers on low earnings who will not benefit from any significant tax reductions or additional tax credits this year. This year, though those workers without an occupational pension will also contribute into the new auto enrolment pension scheme.  For a worker doing 39 hours a week, the increase of 65c per hour will bring an additional €1,318 into their payroll but after tax, USC and employee PRSI of €345 and now an additional employee pension contribution through auto enrolment of €430 the net increase in income will be €542.  Of course, they will benefit from having a pension in place to help fund retirement, but the impact of the increase may not be as much as they first thought.”

SARP

“EY welcomes the extension of the SARP relief programme for the next 5 years and enables employers to plan better to attract senior talent to come and work in Ireland. In 2023 the cost of SARP to the state was €56.3million and 2,925 taxpayers benefitted from the relief. Of those taxpayers 953 employees earned less than €150,000.  The increase in the qualifying threshold from €100,000 to €125,000 will mean that a number of employees will miss out in future but the savings to the Exchequer are minimal.  If of the 953 that qualified in 2023 and say 400 of those earned €125,000 or less the savings to the Exchequer of 12% per taxpayer would be €1.2 million at best and probably less than €1million.”

VAT Changes

"The reduction in the VAT rate on the sale of completed apartments from midnight until 31st of December 2030 will be welcomed by all. It is one of a number of measures introduced in Budget 2026 to alleviate the housing crisis. However, its introduction by midnight tonight is unexpected. Property legislation is complex and understanding in detail what "completed" means and the difference between a dwelling and an apartment will need to be considered by suppliers to ensure there are no hidden pitfalls. While positive news, the devil will be in the detail as to the ease of application."

E-invoicing

“The roll out of e-invoicing in Ireland was to be expected in line with an EU Directive on the introduction of e-invoicing for cross border B2B transactions by 2030. The update on the timeline for the domestic Irish roll out, to be published tomorrow, will be welcomed by businesses who will need ample time to prepare. Such an initiative will be costly in the short term but should deliver efficiencies for businesses from a compliance perspective in the longer term.”

Economic Impact

“From an infrastructure perspective, Budget 2026 primarily reinforced investment commitments announced in the National Development Plan review in July. Specific sectoral investment plans for the next five years will be revealed by relevant departments in the coming weeks, providing clarity on projects for 2026 and beyond. The action plan from the Accelerated Infrastructure Taskforce, set to be released in November, will outline changes needed to enhance infrastructure delivery and address challenges in planning, regulation, and administration.

 For Irish businesses, the budget signals the need to prepare. The public investment pipeline is expanding in construction, engineering, green tech, and digital systems. Success will favour those who anticipate spending trends, build necessary skills, and establish partnerships early."

Entrepreneur relief

"We welcome the increase in the lifetime limit for entrepreneur relief from 1m to 1.5m which will result in an overall tax saving of 115,000 where an individual selling their business meets the relevant conditions.  It would be good to see some technical adjustments to the relief in the Finance Bill to ensure that some entrepreneurs are not precluded from the relief due to their corporate structure - for example if there is a dormant entity in the group."

R&D Tax Credit

“Encouraging greater levels of research and development (R&D) is one of the most powerful ways Ireland can strengthen its economy, through attracting investment to fuel growth, and building a thriving indigenous business base.

Budget 2026 has confirmed the R&D tax credit now rises to 35%, reflecting a 10% increase in the last 2 years and sending a clear signal of intent demonstrating Ireland’s commitment not just to retaining existing investment in R&D, but also to winning the next wave of FDI. The Minister also announced an increase in the 1st year payment threshold from €75K to €87.5K to support the SME sector further.

The Minister announced that further changes to the R&D regime will be published in the coming weeks to better align with industry practices – examples signposted in the areas of outsourcing and qualifying expenditure definitions. This is very welcome, and it is hoped that these additional changes will seek to broaden the definition of R&D, remove the outsourcing rules to foster greater collaboration, and modernise the rules for related-party R&D spend. This should position the Irish R&D regime at the global leading edge and secure Ireland’s position as a premier destination for research, talent, and investment.”

Housing measures

“The many activation measures to stimulate housebuilding activity in the budget will assist in reaching the revised delivery targets of 300,000 homes by 2030. The exchequer capital funding allocation for 2026 is the largest on record. The extra funding for the HBFI will support SME housebuilders who need to ramp up their delivery substantially, while changes to the VAT rate for apartment construction will support viability.”

VAT Apartment

“Viability has been a key issue impacting the delivery of housing supply, particularly in relation to the construction of apartments.  The total cost to build a two-bed apartment in Dublin ranged from approximately €550,000 to €592,000 at the end of 2024. Measures to bridge the viability gap between the delivery cost of building an apartment and the market sale price have been uppermost on the Government’s agenda.

We understand that there are some 14,000 apartments with planning permission in the Dublin City Council area, and many more across Dublin, which have not commenced due to viability issues. The reduction in VAT to 9% for the construction of new apartments will further help to bridge the viability gap for apartment construction in our cities and on brownfield sites. This will support the Government’s overriding priority in the revised National Planning Framework of delivering compact growth in urban settlements. Central to delivering on this objective will be investment in the enabling infrastructure to realise that compact growth.”

City living/living over shop

“The positive changes to the Living City Initiative and living over the shop premises will help tackle the viability of refurbishing vacant units in urban areas. Recent EY research for Geodirectory found there are approximately 15,000 vacant commercial buildings across the six counties which have designated Special Regeneration Areas. By bringing a proportion of these premises up to habitable standards and back into use for residential purposes, it may well increase investment and encourage people back to living in city centres. The potential economic win-win in terms of higher population and footfall for local business owners, alongside the enhanced vibrancy which would ensue, will positively support economic activity and the challenges faced by the hospitality sector, at least in these locations.”

Derilict Propoerty Tax

“As with the changes to the Living City Initiative and living over the shop premises to activate residential development, the introduction of the new Derelict Property Tax in 2026 will encourage the restoration of these properties back into use. Recent EY research for Geodirectory found that there are almost 20,000 derelict properties scattered nationwide, with almost 40 per cent of these concentrated along the western seaboard. Moving the responsibility for collection of this tax to the Revenue Commissioners from the local authorities will likely ensure 100 per cent tax compliance and collection. The onus will be on property owners of derelict properties or sites to redevelop them or put them up for sale to someone who wants to put them back into use, thereby also supporting the sustainability agenda.”

Capital Spending - Housing

"While there have been a number of positive announcements on the taxation side to increase housing supply, the substantial capital allocation for housing - €7.2 billion in 2026 – the largest on record - is worthy of note. This will fund the delivery of thousands of social, affordable and cost rental homes, the regeneration of towns and cities, affordability initiatives, retrofitting and energy improvements to the housing stock, all of which are essential. But with a requirement of up to 60,000 homes per annum, and a target funding requirement of the order of €25 billion of development capital, according to the Department of Finance, there will be a substantial private capital requirement for the delivery of private housing to ensure an appropriate public private tenure balance is delivered in regard to housing supply."

Economic Impact

“The Irish economy is performing well, with the number of people in employment at a record high. But while uncertainty has abated somewhat with the recent EU-US trade deal, there are risks to the public finances from the new tariff landscape and the concentrated nature of corporation tax receipts.

Policies to shore up competitiveness and build resilience will be important in mitigating global headwinds. The enhancement to the R&D tax credit announced in Budget 2026 should support innovation and help boost productivity, alongside investment to improve infrastructure including housing. The commitment given by the Government to continue putting money aside in the State’s saving funds is also welcome.”

Climate Measures

"It is very welcome to see continued support for climate action in today’s budget , in particular the €3.5bn investment in the grid to facilitate energy transition along with €1.1 bn for the department of Climate energy & environment. It is also welcome to see incentives for alternative fuels such as HVO and the ongoing support for energy efficiency and the retrofitting agenda also provides much needed support for low income households via the warmer home scheme . Overall this is a positive budget from a climate perspective at a challenging time for the country."

Residential Developments

“There has been a significant focus in the budget on addressing viability concerns in the apartment sector.  The industry has long sought a reduction in VAT on new residential development and as widely flagged at the weekend, the Minister has confirmed that the VAT rate will be reduced from 13.5% to 9% specifically in respect of new apartments effective from midnight tonight.  A full tax exemption for units within the Cost Rental Scheme will be introduced and an enhanced corporation tax deduction has also been announced for new apartment developments (10 or more apartments).  The latter measure will provide for an additional deduction of 125% of the cost of an apartment up to a cap of €50,000 per apartment (a potential benefit of €6,250 per apartment for a corporate developer taxable at 12.5%).   The industry will very much welcome the extension of the Stamp Duty Rebate Scheme for land developed for residential purposes until 2030, as well as amendments to certain commencement/completion timelines for large scale residential schemes which were inhibiting the efficacy of the scheme”.

Tech

"Today's budget includes funding for the National Artificial Intelligence Office to promote AI adoption in Ireland which is very welcome.  To deliver on our significant Infrastructure ambition, the use of AI should be at the heart of our plans given its potential to deliver quickly and at scale."

Energy measures

“The many positive infrastructure elements in today’s budget focused primarily on the enablement of housing, energy security and renewables are very welcome, and most were well flagged in advance. With capital certainty now provided, delivery is key. Challenges with regard to consenting and lead times continue to pose difficulties for the utilities and their supply chains but no doubt detailed delivery and action plans should support delivery.”

"It is very welcome to see the 9% VAT rate for gas and electricity for households will remain for the next five years and eligibility for the fuel allowance will be extended to those in receipt of the Working Family Payment. Fuel poverty remains a real challenge as price volatility continues to rise so this certainty will no doubt come as a great relief to many.”