Here are the key points for Irish SMEs from the Irish budget 2026
The Irish Budget 2026 was released on October 7 2025. It may aim to “secure our country’s future” but the €9.4 billion package offers limited changes or benefits for many Irish businesses and families alike.
Some measures, like the extended VAT reduction on electricity, will support SMEs struggling with the increased costs of doing business in Ireland in recent years. But the overall Budget 2026 focus was on property and housing rather than supporting businesses or reducing the burdens of Irish families, says manager Maurice O’Brien. “The average working couple, also, will probably not see significant benefits from this budget. In fact, with fuel rises they may have less money in their pockets.”
Two areas of interest for Irish businesses, as identified by Maurice, are the real value of VAT changes and the potential of the minimum wage increase to cost more in PRSI.
VAT changes from July 2026
The VAT rate for food and catering businesses and hairdressing services will be cut from 13.5% to 9% but business won’t benefit from this saving until next year – from July 1st, 2026. As VAT is included in the sale price, catering businesses and hairdressing services stand to save €3.63 in VAT for every €100 of sales received from July 1st 2026.
Minimum wage rise from Jan 1st 2026
- Minimum wage rises by €0.65 to €14.15 per hour.
- The increase is effective form January 1, 2026.
- PRSI and holiday pay need to be considered to avoid an increase in employer’s PRSI.
The National Minimum Wage is goes up by 65c to €14.15 per hour, and the Universal Social Charge (USC) 2% rate band raises to €28,700 to avoid penalising minimum wage earners. But, in addition to the increase in the minimum wage, businesses should take employers PRSI rates and holiday pay into account when rostering their staff each week, as the amount of PRSI an employer pays depends on the individual employee’s gross pay.
- If their weekly earnings are €527 or less, the employer pays 9%.
- If their weekly earnings are more than €527, the employer pays 11.25%.
If you have an employee currently working 38 hours on the current minimum wage rate of €13.50, their total gross pay would be €513 – this is at the 9% PRSI rate.
If the same employee works 38 hours at the new rate of €14.15, their total gross pay increases to €537.70. Employers would now be paying employer’s PRSI at 11.25% on the full €537.70. This results in an extra cost to the employer of €41.00 per week per employee based on a 38-hour working week on minimum wage.
The takeaway is that if minimum wage employees are working under 38 hours per week, then employer PRSI will remain at 9% and the total extra wage cost to the employer will be €0.76 per hour worked from January 1st, 2026.
| Component | Old Rate (€13.50/hr, 9% PRSI) | New Rate (€14.15/hr, 11.25% PRSI) | Difference (€) |
| Gross Pay | €513.00 | €537.70 | €24.70 |
| Holiday Pay (8%) | €41.04 | €43.02 | €1.98 |
| Employer PRSI | €46.17 | €60.49 | €14.32 |
| Total Cost | €600.21 | €641.21 | €41.00 |
Other highlights and 2026 tax changes
When setting taxation policy, the Government identified 5 areas of focus:
- Household Tax Measures;
- Supporting the Housing Market;
- Supporting Enterprise, SMEs and the Agricultural Sector;
- Supporting Climate Action;
- and Other Taxation Measures.
Key points for Irish businesses in 2026
- €1.3 billion has been set aside for enterprise support including more funding for Enterprise Ireland, the IDA and other enterprise offices.
- The Revised Entrepreneur Relief currently provides for a reduced rate of Capital Gains Tax of 10% on gains of up to €1 million, over a lifetime, arising from the disposal of qualifying business assets. This lifetime limit is being increased to €1.5 million from 1 January 2026.
- Research and Development Tax Credit have been enhanced with an increase in the rate of the credit from 30% to 35%, an increase in the first-year payment threshold from €75,000 to €87,500 and administrative simplification measure to allow 100% of an R&D employee’s emoluments as qualifying costs where at least 95% of their time is spent on qualifying R&D activities.
- There are no changes to personal income tax rates for workers.
- The reduced 9% rate on gas and electricity is extended to December 31, 2030.
- Finance Bill 2025 will provide for an extension of the Key Employee Engagement Programme (KEEP) to 31 December 2028.
- To address the viability gap that currently exists between total apartment development costs and viable market price from 8 October 2025, the VAT rate applied to the construction of new apartments will be reduced from 13.5% to 9% until 31 December 2030 and an enhanced Corporation Tax deduction is being introduced for qualifying apartment construction costs. The deduction allowed for certain apartment construction costs will be enhanced to 125% of the actual cost incurred, subject to a cap of €50,000 enhanced deduction per apartment. This will provide a net benefit of up to €6,250 per apartment (€50,000 enhanced deduction x 12.5% Corporation Tax).
Further Budget 2026 reading
Time to plan your business budget
Now the national budget for 2026 is out, Irish businesses should be planning their own budget for year ahead and Irish business owners should be ensuring they are meeting financial deadlines.
Our advice is to plan in October so you are ready to go on January 1st. It’s time to review, check for changes and ensure you are structured for success in 2026.