Budget

Detailed analysis

Budget 2026, announced on 7 October, provides a €9.4bn package of spending and tax measures, with approximately 85% allocated to public expenditure.

While significant in scale, the Budget does not provide any significant tax changes. For many in the workforce and the wider public, the measures may feel limited in scope and impact.

There are essentially two tax policy measures, both well flagged, being the VAT cut to 9% for the food hospitality sector as a blunt measure to support businesses and consumers, which will only take effect from July next year. The second is a VAT rate cut to support the construction of new apartments.

While the government may have acknowledged calls – including from the Irish Fiscal Advisory Council – to rein in public spending, those warnings appear to have gone largely unheeded.

Although the Minister signalled some prudence in not indexing income tax thresholds and tax credits to inflation and a conservative approach to other tax changes, this is not a Budget of restraint.

At €9.4bn, the Budget 2026 package is substantial relative to the size of the economy

Despite the large spending package, the government appears to be taking a calculated gamble by leaning heavily on volatile corporate tax receipts – revenues that may not be sustainable in the longer term.

The continuing commitment to long term public infrastructure projects and increased funding across water, housing, grid, transport and other key infrastructure is important. Such investment is essential not only for national resilience but also for sustaining the competitiveness of the FDI sector and the broader economy.

Notwithstanding the small increase to the lifetime limit at which Revised CGT Entrepreneur applied from €1m to €1.5m, which continues to compare poorly with the equivalent regime in the UK, and bolstering the R&D regime in increasing the credit from 30% to 35%, there is no meaningful measures to boost entrepreneurship and job creation by privately owned businesses.

Domestic businesses need more support from this government rather than signalling plans for potential change, which was a common theme across the Finance Ministers speech. This need has never been more acute following recent volatility driven by external factors which has utterly exposed our dependency on tax receipts from FDI businesses.

While stronger supports for entrepreneurs and domestic Irish businesses could help reduce this dependency, Budget 2026 regrettably represents a missed opportunity in this regard.

Explore RSM Ireland's Budget 2026 insights below.

Budget 2026: key insights

Economic outlook

Budget 2026: more spending will support growth, but risks pushing up inflation

The Irish government’s Budget 2026 has introduced a significant economic stimulus package, injecting an additional €9.4bn into the economy. The bulk of this comes from €8.1bn in increased public spending, with the remainder attributed to targeted tax cuts. This expansionary approach is expected to sustain domestic growth, particularly as Ireland faces external pressures such as US tariffs.

Budget 2026: economic outlook

Foreign direct investment

Budget 2026: strengthening Ireland’s position as a global FDI hub

In the competitive landscape of global investment, Budget 2026 represented a strategic opportunity for Ireland to reinforce its attractiveness as a destination for foreign direct investment (FDI).

Moreover, the Irish Budget provided scope to simplify and modernise Ireland's corporate tax regime by enhancing clarity, reducing complexity and increasing Ireland's appeal for long-term investment.

Budget 2026: FDI and corporate tax

VAT

VAT reductions and sector boosts

A reduced rate of 9% (down from 13.5%) applicable to the sale of new apartments will be a welcome measure to boost housing supply, address the viability gap in apartment construction and shore up constraints in housing supply. Similarly, the reduced rate of 9% for food hospitality now gives certainty to this sector.

Budget 2026: VAT

Private client tax

Budget 2026: A cautious approach to tax reform amid rising costs

Budget 2026 signals a shift in Ireland’s fiscal approach, with no expansion of the standard income tax band, meaning taxpayers won’t see the usual annual boost in take-home pay. While income tax bands, rates, and credits remain largely unchanged, inflationary pressures will need to be absorbed without additional relief.

Budget 2026: private client tax

R&D

Budget 2026 bolsters Ireland's R&D regime

Heading into Budget 2026, expectations were high for a bold overhaul of Ireland’s R&D tax credit regime. Following the Department of Finance’s public consultation earlier this year, RSM and other industry voices anticipated meaningful reform in Budget 2026: an R&D credit rate of 35%, broader SME access, and a streamlined, predictable claims process. These changes were seen as essential to keeping Ireland competitive in a global innovation race.

Instead, the Government, in Budget 2026, delivered a modest response.

Budget 2026: R&D tax credits