Budget 2027

The imminent Savings and Investment Account could be Budget 2027’s most significant long-term wealth-building measure, helping to shift savers from cash to investment. We expect more detail on how this scheme will simplify saving and encourage long-term investing with an expected tax-free threshold in the tens of thousands range and an annual contribution upper limit, to which a 1% tax charge will apply on value above that threshold. 

Budget 2027 will deliver another modest income-tax adjustment through increases in the 40% threshold and tax credits. Although welcome, it is not reform. The real question is whether Government will commit to a multi-year strategy for income tax, rather than continuing to make annual, incremental adjustments. A longer-term plan would bring more certainty for taxpayers and investors in the Irish economy.

USC is a remanent of the financial crisis, but Budget 2027 could mark the first meaningful step towards ending the double taxation on pension savings. Potential reforms could include reducing or removing the 3% USC surcharge on ‘non-employment income’ over €100k, to further align self-employed taxpayers with their PAYE equivalents. Allowing a USC deduction for pension contributions or exempting pension drawings from USC at retirement would encourage long-term saving while creating a fairer tax system for both employees and the self-employed.

The most significant private-client tax reform may not land in Budget 2027. With limited fiscal headroom, fundamental changes to the capital taxes (i.e. CGT, CAT and stamp duty) are unlikely. But we expect the Government to use Budget 2027 to announce a structured review, identifying targeted transitional measures and setting out a timetable for reform which may ultimately matter more than another annual tax tweak.

A significant CGT cut may be too ambitious for Budget 2027, but the case for reform is becoming harder to ignore. At 33%, Ireland’s headline CGT rate is high by international standards. A targeted extension of Entrepreneur Relief may deliver some help in the short-term; but a wholesale review of the role of CGT is needed. Capital taxes have not been reshaped since the shock of the financial crisis, but today’s high-performing economy requires sustainable reform to support enterprise in Ireland.  

Budget 2027 will include a broader corporate-tax simplification package. Look out for Ireland’s overlapping interest-deductibility rules reform, an introduction of a foreign branch participation exemption and/or plans to streamline Pillar Two administration. This would improve certainty for multinational groups and strengthen Ireland’s position as a location for regional headquarters and strategic investment.

"Making work pay” is only half the equation. With a tight labour market, Budget 2027 still needs to make taking on people easier. While tax cuts may improve take-home pay, employers are simultaneously facing higher PRSI costs and an increasing administrative burden. Practical employment tax simplification is needed to deliver benefits for both employers and employees – reducing cost and complexity to help tackle the talent shortages. 

Given the Minister of Finance has said the income tax package would absorb €1.2bn of the overall €1.5bn tax package, an increase in the standard-rate band is expected. A potential €2,000 increase in the point at which the 40% income tax rate applies, gives a maximum benefit of approximately €400 to relevant employees. Whilst this change would benefit higher rate taxpayers, it would increase net take-home pay without increasing gross salaries, providing some support to employers facing ongoing wage inflation and recruitment pressures.

Modest increases to the personal and PAYE tax credit are also expected, which would not just benefit higher rate taxpayers but also serve to increase employees’ net pay. 

In addition, the planned increases in employee and employer PRSI are not standalone Budget measures but form part of the Government's longer term funding strategy to address the increasing cost of State Pension provision and pressures associated with an ageing population. Consequently, some of the benefit of expected personal tax reductions will be offset by higher social insurance costs for both employers and employees.
 

We expect some movement on Capital Acquisitions Tax (CAT), most likely through modest increases in the lifetime CAT thresholds, but incremental changes do not address the underlying architecture. Ireland needs to ask what an appropriate inheritance and gift tax regime should look like for modern families and intergenerational wealth. Whilst Budget 2027 may adjust the numbers, a strategic review remains outstanding.

Recent increases in stamp duty rates have added to the cost of property when housing supply is still a key concern. These increases continue to put property ownership beyond the reach of many. A review of this antiquated tax should be encouraged to reassess its place within the wider Irish taxation system and the unintended consequences it is causing.  

Despite recent rhetoric suggesting that there will be no short-term cost-of-living measures, we expect the Government will want to get ahead of potential soaring electricity and fuel prices. This much needed but costly support would be a Budget 2027 surprise but could mitigate future protests like we saw at the start of the year. 

Ireland’s competitive advantage depends on its ability to evolve with new technologies so look out for an innovation credit in Budget 2027 that keeps pace with developments such as artificial intelligence, automation and advanced manufacturing. This would demonstrate Ireland’s ambition to lead in this technology space and help crystallise the vision set out in the Digital and AI Strategy published earlier this year.

If the Government wants to encourage investment, then Budget 2027 needs to commit to abolishing the deemed disposal regime to rebalance the playing field with other developed economies - removing this barrier to long-term investment where investors have to pay tax on gains that have not yet been realised.