Employment Tax

Ireland | Budget 2026 : Key measures impacting employers and employees

Summary

Budget 2026 is the first budget of this government and it had been signalled well in advance that it would not be a “give awayˮ budget. For the first time in recent years there is no change to the income tax rates or bands. The government announced an increase of €0.65 to the minimum wage, to €14.15, from 1 January 2026, and the 2% USC band has been updated so that minimum wage workers remain subject to the lower USC rates.

The Minister confirmed that the ‘Special Assignee Relief Programmeʼ (SARP) and ‘Foreign Earnings Deductionʼ (FED) would be extended to 31 December 2030, which will be welcome news for employers hoping to attract key employees to Ireland and those seeking to generate export business abroad.

The detail

Key tax measures impacting both employers and employees

• SARP, which provides an income tax reduction for certain employees who are assigned or transfer to Ireland, is extended for further 5 years, to 31 December 2030. However, the qualifying annual salary threshold will increase from €100,000 to €125,000. The Minister confirmed that the SARP administration process be simplified in the Finance Bill.
• FED, which provides an income tax deduction for employees who temporarily work abroad in “relevant statesˮ, is also extended for 5 years, to 31 December The maximum level of tax relief is being increased to €50,000, with the Philippines and Turkey included in the list of “relevant statesˮ from 2026.
• As previously signalled, PRSI (employee and employer social security) increased by 1% from 1 October 2025 (to 4.2% and 11.25%, respectively). A further 0.15% increase (to 4.35% and 11.4%, respectively) is due to come into effect from October 2026.
• The reduction of €10,000 to the Original Market Value (OMV) when calculating the benefit in kind on company cars in vehicle categories A to D will be extended to 2026. The reduction will be tapered to €5,000 in 2027 and €2,500 in 2028. The lower limit of the highest mileage band is being permanently reduced from 52,001 km to 48,001 km from 1 January 2026.
• There will be a new BIK category for zero emission cars, which will be subject to reduced BIK rates of 6 to 15%, depending on business mileage.

Key tax measures impacting individuals

• No change to the standard rate income tax bands or the PAYE / Personal tax credits partners.
• The tax rate applicable to Irish and equivalent offshore funds and foreign life assurance products will be reduced from 41% to 38%.

Updated personal tax bands and credits
Income tax bands	2025	2026	Change in standard rate band
Single person	€44,000 @ 20% Balance @ 40%	€44,000 @ 20% Balance @ 40%	No change
Single person qualifying for Single Person Child Carer Credit	€48,000 @ 20% Balance @ 40%	€48,000 @ 20% Balance @ 40%	No change
Married or in a civil partnership (one income)	€53,000 @ 20% Balance @ 40%	€53,000 @ 20% Balance @ 40%	No change
Married or in a civil partnership (both with income)	€53,000 @ 20% Balance @ 40% (with a max increase of €35,000)	€53,000 @ 20% Balance @ 40% (with a max increase of €35,000)	No change
Tax credits	2025	2026	Change in tax credit
Single person	€2,000	€2,000	No change
Married Person or Civil Partner	€4,000	€4,000	No change
Single Person Child Carer Credit	€1,900	€1,900	No change
Home Carer Tax Credit (max)	€1,950	€1,950	No change
Employee PAYE Credit	€2,000	€2,000	No change
Earned Income Tax Credit	€2,000	€2,000	No change
Single Person Rent Tax Credit	€1,000	€1,000	No change
Married Person or Civil Partner Rent Credit	€2,000	€2,000	No change
USC rates & thresholds	2025	2026	Change
0.5%	First €12,012	First €12,012	N/A
2%	Next €15,370	Next €16,688	↑ €1,318
3%	Next €42,662	Next €41,344	↓ €1,318
8%	Balance	Balance	–

Other measures impacting individuals and targeted groups

• The majority of social welfare benefit payments will increase by €10 per week.
• Mortgage interest relief for certain homeowners will be extended by 2 years to 2028. A reduced level of relief will apply in 2027, however.
• The Rent Tax Credit of €1,000 for a single person and €2,000 for a jointly assessed couple is extended to 31 December 2028.
• The student contribution fee for Third Level education will be reduced to €2,500 on a permanent basis.

Other upcoming changes to be aware of

Pension auto-enrollment

The long signalled pension auto-enrolment scheme is due to come into effect in January 2026. As a reminder, auto-enrolment will apply to employees:

• aged between 23 and 60,
• earning a minimum of €20,000 per year across all employments, and
• not already part of an occupational pension scheme.

No tax relief will apply to employee contributions; instead, the government will contribute a certain amount to the employeeʼs pension fund.

It is important that employers communicate with employees in relation to the changes and, in particular, make employees aware of the difference in tax treatment that applies to employee contributions under auto-enrolment versus employee contributions to an occupational pension scheme.

Vialto view

While it had been well signalled that the tax package in Budget 2026 would be limited, individuals and employers will be disappointed that there was no change to the income tax rates or bands announced today.

The extension of SARP and FED to 2030 is welcome news. We await details of the simplification of the SARP administration process in the Finance Bill. It is hoped, in particular, that the strict requirement for employers to apply for the relief on behalf of employees within 90 days of their arrival in Ireland is removed as this has proved to be an unnecessary stumbling block to claiming the relief.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact or alternatively:

Keith Connaughton
Partner

Aoife Reid
Partner

Clara Flynn
Director

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