Budget 2027

Introduction 

Budget 2027 was presented as setting out a path to bring us to a place in which work is rewarded, risk repaid and investments in our future can bear fruit. Whilst such sentiments are noble, the focus of the Budget tax measures was almost entirely on addressing the cost of living pressures for middle income earners through tax reductions which were largely publicised in the media in advance of the Budget being delivered. 

In this Bulletin, we highlight some of the more substantive taxation measures announced in the Budget speech of Minister Harris. Whilst the real detail surrounding many of these changes will be contained in the Finance Bill, we have addressed some of these measures below. 

Personal Taxes 

• Income Tax - As reported in advance of the budget, the standard rate band cut-off point is being increased by €2,500 for all earners. Income tax credits are also being adjusted with €125 increases in the Person, Employee and Earned Income Tax Credits and a €100 increase in the Home Carer Tax Credit. The sting in the tail is of course the continuing increase in PRSI rates from 1 October 2026 by an additional 0.15% (which applies to both employer/ employee rates and self-employed contribution rates). The positive impact of such income tax changes is somewhat diluted therefore.
• USC - The ceiling for the 2% rate of the Universal Social Charge (USC) is being increased by €1,600 to allow for the increase in the minimum wage.
• Taxation of Investments - The rate of Investment Undertaking Tax is being reduced from 38% to 35%. The rate of Life Assurance Exit Tax is being reduced from 38% to 35%. The rate of tax applying to equivalent offshore funds is being reduced from 38% to 35%. The Bill will introduce a new section specifically dealing with the taxation of investors in Irish domiciled investments funds whose units are held in a recognised clearing system. The rate of tax which applies to life assurance policies commenced after 2001 by a life assurance company, agency or branch operating in an EU, EEA or an OECD member state with which Ireland has a double taxation treaty is being reduced from 38% to 35%.
• CAT Thresholds - There has been an increase in the CAT thresholds.  However, those who were calling for more radical reform will be disappointed. The increase will apply as follows:

1. Category A Threshold will be increased to €420,000
2. Category B Threshold will be increased to €44,000
3. Category C Threshold will be increased to €22,000

As such, the thresholds remain lower than the level of such thresholds immediately following the financial crash in late 2008. Given that property values have increased over 50% since this time, there remains a real reduction in thresholds since then. Additionally, the fact that the legislation continue to require aggregation of benefits back to December 1991 has not been addressed. More work needed here.

New Investment Account 

• Following announcements earlier in the year, the new Investment Account is being introduced and will be available from 1 July 2027. The account is designed to simplify retail investment in riskier assets by creating a new framework for investing in capital markets. Investments made through the account will be subject to a flat rate tax of 1% on the value of the account above a tax-free threshold of €50,000. An annual contribution limit of €12,000 will also apply. Whilst welcome, the low limits of contribution and what may be a high rate of tax – which is levied on value and not income - once the €50,000 limit may undermine the attractiveness.

Housing Market 

• Rent Tax Credit - The Rent Tax Credit is being increased by €150 to €1,150 for a single claimant or €300 to €2,300 in the case of a jointly assessed couple. 
• Rent a Room - The Rent a Room rental income ceiling is being increased from €14,000 to €16,000 from 1 January 2027. The Rent a Room Income Tax Relief is also extended to certain Designated Auxiliary Dwellings installed after 27 July 2026 and which are consistent with the 2026 Planning Regulations on such structures. 
• Help to Buy - The maximum relief available under the Help to Buy scheme is being increased by €5,000 from €30,000 to €35,000 from 7 October 2026.
• Residential Zoned Land Tax - Finance (No. 2) Bill 2026 will provide for a further opportunity for Residential Zoned Land Tax (RZLT) landowners to make a submission requesting change in zoning of land appearing on the revised map for 2027, and, in certain circumstances, being exempted from RZLT for 2027 on foot of such submissions.
• Derelict Property Tax - Finance (No. 2) Bill 2026 will introduce a new Derelict Property Tax to support housing supply and regeneration. From 1 January to 31 August 2027 Local Authorities will respect relevant towns and identify derelict properties with the first pay and file deadline on 23 June 2028.

Supporting Enterprise, SMEs and Agriculture 

Minister Harris announced a number of measures targeted mainly at the Enterprise & SME sector in Budget 2027:

• Capital Gains Tax - The standard rate of Capital Gains Tax (CGT) in Section 28(3) of the TCA 1997 is being reduced from 33% to 31%. This reduction applies in respect of disposals made on or after 7 October 2026. There will be no change to the 33% rate which applies to the disposal of development land. A reduction in the rate of CGT is long overdue as Ireland’s CGT rate has long been identified as a barrier to investment from abroad.  
• Research and Development Tax Credit - A number of enhancements to the R&D tax credit are being introduced in Budget 2027.  This includes increasing the subcontracting limits to 20% and 200,000, where project work is subcontracted to the university sector, and also increasing the first-year payment threshold to €105,000 to provide a cash- flow benefit for small R&D projects and encourage more companies to engage with the regime. Companies will also be able to increase their new qualifying cost base by 5% of qualifying R&D wage costs, subject to them having incurred sufficient levels of expenditure.

These changes are welcome, particularly the increase in the amount of R&D expenditure that will qualify for relief when projects are subcontracted to universities. Collaboration between universities and industry is hugely important to build technical expertise and real innovation, and these changes should make it easier for businesses to draw on the research expertise available in our third-level institutions. That said, there was an opportunity to go further in encouraging this type of collaboration that has not been fully taken. 

• Relief for Investment in Corporate Trades - Employment Investment Incentive, Start- Up Capital Incentive and Start-Up Relief for Entrepreneurs are being extended in their current form, subject to the adoption of the new General Block Exemption Regulation in 2027.
• Capital Gains Tax Relief for Investment in Innovative Enterprises -  It is intended to extend Angel Investor Relief in its current form, subject to the adoption of the new GBER.
• Changes to Preliminary Corporation Tax Requirements - Budget 2027 will provide:
• For an extension to the current limited top-up mechanism, to provide that preliminary tax requirements are satisfied where at least 80% of the current’s year liability has been paid by the final preliminary tax instalment date and a top-up payment to reach 100% of the liability is made within four months of the end of the accounting period.
• Removal of a 45% deeming provision.

• An increase in the small company threshold from €200,000 to €350,000.

  The changes to preliminary corporation tax should remove what had become a harsh trap for growing Irish companies. An SME could move into a large company regime without necessarily realising that its preliminary tax obligations had changed and become more onerous. By the time that became apparent, the first payment deadline could already have passed and interest would be due. This interest has been strictly collected by Revenue in recent years with no possibility of mitigation. Raising the small-company threshold and changing the payment rules should reduce the risk of otherwise compliant businesses being subject to interest costs which they should not be liable to.

Other Taxation Measures 

• Pensions - Finance (No. 2) Bill 2026 will legislate to revise the current age-related valuation factors which are applied to value Defined Benefit pension entitlements for the purposes of the Standard Fund Threshold. 

The changes to the age-related valuation factors should be very welcome, particularly in the higher paid roles in the public sector. The existing rules have meant that some higher-paid public servants can exceed the Standard Fund Threshold and face an additional tax liability because of the way their defined benefit pension is valued using ‘age-related factors’. This has caused issues in recruitment and retention at senior levels of the public service in recent years. The Standard Fund Threshold is already due to increase over the coming years, but the age-related factors also needed to be addressed to deal with the issue. We will need to see the detail in the Finance Bill, but this could be an important change that will offer significant benefit for those working in higher paid roles in the public sector.