Shaping the Future Beyond Budget 2027 with EY

“Budget 2027 arrives against the most challenging global backdrop since 2022. But Ireland is in an enviable position as one of the few western countries running a surplus, even if it is lower than expected.

The continued focus on capital spending is welcome, with no guarantee that exceptional corporation tax revenues will last. And the tax changes should lift the take home pay of the average worker by about 1.5% - a meaningful support to household incomes facing higher inflation.

In short, it was critical that the Government did not spend more than the package today and maintained a strong surplus. Fiscal discipline remains Ireland's best insurance policy against a sharper economic slowdown.”

Future capital spending

"Next year, Ireland’s capital spending will reach its highest share of total government expenditure since at least the year 2000 on an EU comparable basis. That shows the huge commitment to building for the future. It also makes sense, as we don’t know for how long our great run of revenue will last".

Heating cost relief

“The costs of home heating oil have bounced up and down all summer depending on a number of geopolitical factors and announcements from the White House or from OPEC countries. The reduction of carbon taxes from 63c per tonne to 48c per tonne will be widely welcomed and is one of many measures that people will have been watching out for to counter the current cost of living crisis.”

Income Tax Changes

"If all the reports issued this morning are to be believed, the “magic number” for taxpayers is that a single person earning €50,000 per annum will be €691 better off from Budget 2027. This is broken down by an increase of €750 from the widened tax bands and credits and an additional €16 through raising the 2% USC band. What reduces the net income of the taxpayer is the increase to the employee PRSI rate to 4.35 % effective from October 2026, which will rise to 4.5% in October 2027. This will increase taxes by €75."

Business Expense Reporting Reform

“One unexpected surprise for businesses in the Minister’s speech was the change to the Enhanced Reporting Requirements (ERR) for relevant business expenses. The current legislation meant that employers had to report in “real time” certain business expenses paid to employees. This left employers who paid expenses daily with an unmanageable daily reporting requirement to Revenue, and increased the workload of payroll and finance departments in those companies. The introduction of the monthly requirement will be welcomed by all employers as a more practical and pragmatic way of reporting business expenses.”

Progress on Tax Bands

“The Government roadmap to get the top rate of income tax starting at €50,000 got even closer today with the €2,500 increase to the 20% tax band.  How does Ireland compare though with our European neighbours with a new top rate band kicking in at €46,500?  Despite the increased tax bands, in Ireland taxpayers reach the top rate of income tax earlier than most other countries that we compete with.”

"The energy supports announced in Budget 2027 will be important to ease the pressure on many households and businesses as a result of the impact of geopolitical volatility on energy prices this year.

However, it will be important that this focus on necessary short-term supports does not come at the expense of longer-term investment like accelerating domestic renewables, strengthening grid infrastructure and building system resilience."

"It is welcome to see R&D measures aimed at further enhancing the regime through increasing the 15% outsourcing restriction to 20% for universities, and increasing the first year cash instalment from €87,500 to €105,000, as well as signalling greater flexibility for qualifying costs and clinical trial activity. While many of the FDI leaders and indigenous entrepreneurs I speak with every day would have hoped to have seen further and faster movement, these changes represent a positive step forward and a real signal of intent.

It also remains imperative that we continue to evolve our R&D regime to ensure Ireland remains a destination of choice for both multinational and indigenous companies. Doing so will support long-term economic growth, innovation and high-value employment for many years to come.”

“Individuals and providers now have clarity on how Ireland's new Savings and Investment Account (SIA) will operate. The account has the potential to provide a much-needed alternative for retail investors looking to diversify beyond low-yield deposit accounts and take a longer-term approach to building wealth.

The SIA will allow for an annual contribution of up to €12,000 and a tax rate of 1% applying on the excess of value over €50,000. This means that no tax would apply for a number of years. The SIA should make investing more attractive and accessible, however, the annual threshold is slightly below what was anticipated.

Importantly, placing tax reporting obligations with regulated providers keeps the process simple for consumers, which will be critical to encouraging participation and building confidence in the new scheme.”

Energy Costs, Competitiveness and Climate Goals

“The Government is clearly prioritising affordability and putting money back into people's pockets in Budget 2027, in particular due to the geopolitical volatility impacting energy supply and prices across the year. The energy measures aim to strike a delicate balance between affordability, competitiveness and our climate commitments.

While reducing carbon tax may weaken part of the climate-price signal, it's worth noting that fuel prices themselves remain high and continue to provide a strong incentive for households to reduce their reliance on fossil fuels. The challenge now is ensuring there are affordable alternatives available for people and businesses to switch to, and focus should now be on speeding up this energy transition.”

VAT Relief for the Charity Sector

“The charity sector has long highlighted the challenges created by irrecoverable VAT. The increase in the VAT Compensation Scheme for charities from €10m to €15m is a positive step towards addressing that issue and recognises the important role charities play in delivering services across communities. From an indirect tax perspective, reducing the VAT cost borne by charities can have a direct and tangible impact on the resources available for charitable activities. Increasing the compensation fund won't solve the underlying structural issue, but it is a practical and targeted way of reducing the tax burden on the sector.”

Changes to Capital Acquisition Tax

“Budget 2027 has seen some welcome increases in the Capital Acquisition Tax (CAT) threshold, which will go some way to reducing the tax burden on the inter-generational transfer of wealth.  With an increase in the Class A CAT threshold of €20,000 this will allow a family with three children to transfer an additional €60k of value to their children at no tax cost. This will result in a tax saving of €19,800.

The change in the Class B threshold from €40k to €44k will allow family members, such as aunts, uncles or grandparents, to further enhance gifts to members of their family and is an area we would like to see continued movement on in future years.”

Lower CGT Rates Support Entrepreneurs

“A 2% reduction in the headline CGT rate from 33% to 31% will reduce the overall effective rate of tax payable by business owners on a sale or transfer of their business. Coupled with the increase to the entrepreneur relief threshold from last year’s budget, this will result in a tax saving of circa €185k for an entrepreneur who sells his/her business in 2027 versus 2025.”

“In the AI economy, talent will be the ultimate competitive advantage for both businesses and nations. That is why the decision to unlock €150 million in the National Training Fund (NTF) to strengthen skills resilience across the economy, including the AI skills needed going forward, is an investment in Ireland's future.

This funding will enable SMEs, entrepreneurs and multinational organisations to build the skills needed to innovate, scale and compete globally, while further strengthening Ireland's position as a leading hub for AI talent, investment and innovation in an increasingly uncertain geopolitical environment"

“Budget 2027 demonstrates the Government's continued commitment to investing in Ireland's future, with capital expenditure of €20.3 billion, the highest level of annual infrastructure investment ever recorded.

Key commitments include over €9 billion for housing and more than €3.5 billion for water and energy infrastructure, helping to address critical capacity constraints and support housing delivery. In transport, an additional €6 billion has been allocated to MetroLink through to 2030, while €4.2 billion will be invested in DART+, BusConnects and the Cork Area Commuter Rail Programme. Together, these investments underline the Government's focus on improving infrastructure, strengthening economic resilience and supporting the transition to a low-carbon economy.”

“Housing continues to be a key domestic focus for the Government, and in aggregate the Budget reflects this. At its core is the investment of €9bn in new housing, and ongoing efforts to accelerate the delivery of enabling infrastructure, such as water and electricity.  While the additional measures this year’s budget represent relatively minor adjustments to different parts of the housing market.

However, both demand and supply measures are captured and this allocation represents record investment. The most recent (June) EY Ireland-Euroconstruct forecasts 40,000 housing completions in 2026 and 43,000 next year, this investment should help to sustain this trajectory to ensure much needed housing stock growth.”

“The changes announced to the Help to Buy Scheme, the Rent a Room relief and the rental tax credit, will be welcomed by affected taxpayers. The other main areas of specific focus in Budget 2027 were the extension to the “rezoning” exemption from RZLT for 2027, and provision of further detail around the imminent derelict site tax of 7%, with legislation to follow in the upcoming Finance Bill. It’s noted that the reduction announced in the Capital Gains Tax rate from 33% to 31% will generally apply to investment property, increasing after tax returns for investors which is positive, but property designated as “development land” is specifically excluded from the reduction”.