Employment Tax

Ireland | Budget 2027: Key measures impacting employers and employees

Summary

Employees will welcome the increases in standard income tax bands and credits following the absence of changes in last year’s Budget. The Minister also announced an increase to the minimum wage from 1 January 2027 and the 2% USC band has been updated so that minimum wage workers remain subject to the lower USC rates.

Key details of the long-awaited personal investment account, which will come into effect on 1 July 2027, were also provided.

The detail

Key tax measures impacting both employers and employees

• As previously flagged, PRSI (employee and employer social security) increased by 0.15% from 1 October 2026 (to 4.35% and 11.4%, respectively). A further 0.15% increase (to 4.5% and 11.55%, respectively) is due to come into effect from 1 October 2027. The employer PRSI threshold will increase from €552 to €600 per week, effective from 1 January 2027.
• An increase of €0.79 to the minimum wage, to €14.94, from 1 January 2027, was also announced.

Key tax measures impacting individuals

Updated personal tax bands and credits

Income tax bands	2026	2027	Change in standard rate band
Single person	€44,000 @ 20% Balance @ 40%	€46,500 @ 20% Balance @ 40%	↑€2,500
Single person qualifying for Single Person Child Carer Credit	€48,000 @ 20% Balance @ 40%	€50,500 @ 20% Balance @ 40%	↑€2,500
Married or in a civil partnership (one income)	€53,000 @ 20% Balance @ 40%	€55,500 @ 20% Balance @ 40%	↑€2,500
Married or in a civil partnership (both with income)	€53,000 @ 20% Balance @ 40% (with a max increase of €37,500)	€55,500 @ 20% Balance @ 40% (with a max increase of €37,500)	↑€2,500
Tax credits	2026	2027	Change in tax credit
Single person	€2,000	€2,125	↑€125
Married Person or Civil Partner	€4,000	€4,250	↑€250
Single Person Child Carer Credit	€1,900	€1,900	No change
Home Carer Tax Credit (max)	€1,950	€2,050	↑€100
Employee PAYE Credit	€2,000	€2,125	↑€125
Earned Income Tax Credit	€2,000	€2,125	↑€125
Single Person Rent Tax Credit	€1,000	€1,150	↑€150
Married Person or Civil Partner Rent Credit	€2,000	€2,300	↑€300
USC rates & thresholds	2026	2027	Change
0.5%	First €12,012	First €12,012	N/A
2%	Next €16,688	Next €18,288	↑€1,600
3%	Next €41,344	Next €39,744	↓€1,600
8%	Balance	Balance	–

• A new personal investment account scheme will come into effect from 1 July 2027. The scheme will enable individuals to invest up to €12,000 each year. Savings within the fund will remain tax free up to €50,000, while savings above that limit will be taxed at a flat rate of 1%.
• The tax rate applicable to Irish and equivalent offshore funds and foreign life assurance products will be reduced from 38% to 35% from 1 January 2027.  This was presented as part of an ongoing process in relation to removing investment barriers, such as the rate of taxation, the eight-year deemed disposal rule and the administrative burden around such investments.
• The tax-free threshold for rent-a-room relief is increased by €2,000 to €16,000.
• The Capital Gains Tax rate is reduced from 33% to 31% for disposals made on or after 7 October 2026.
• The Capital Acquisitions Tax thresholds are updated as follows:
  • Group A: increased by €20,000 to €420,000
  • Group B: increased by €4,000 to €44,000
  • Group C: increased by €2,000 to €22,000

Other measures impacting individuals and targeted groups

• Most social welfare benefit payments will increase by €10 per week.
• The Rent Tax Credit is increased to €1,150 for a single person and €2,300 for a jointly assessed couple.
• The maximum monthly childcare cost for children in fulltime creche is reduced from €735 to €550. The National Childcare Scheme universal subsidy is also increased to €2.50 from €2.14 per hour for all children up to and including senior infants, alongside further enhancements to income assessments on the scheme. This is effective from 1 September 2027.
• The Help to Buy grant for first time buyers purchasing new builds will increase from €30,000 to €35,000.

Other upcoming changes to be aware of

Changes to Enhanced Reporting Requirements (ERR) will be outlined in the Finance Bill. We understand that the changes will give employers the option of continuing to report in real-time or instead report by the 14th of the month following the income tax month in which the reportable benefit is provided to the employee.

The Minister also announced a review of the Cycle to Work and Travel Pass Schemes in 2027, which may provide employers with an opportunity to review tax efficient benefits being provided to employees.

Vialto View

The Budget 2027 measures were well flagged in advance. Taken together, they will result in a level of tax savings for the average taxpayer, in addition to an opportunity to invest in a more tax efficient manner.

However, it remains to be seen if the Budget measures will have a meaningful impact in certain key areas, notably housing.

From a tax administration perspective, the need for reform of the broader framework around investments such as Irish and equivalent offshore funds was acknowledged. It is essential that progress on the simplification of the taxation of this area, including the “deemed disposal” rule, is achieved.

Contact us

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

Keith Connaughton
Partner

Aoife Reid
Partner

Clara Flynn
Director

Want to know when a regional alert is posted?

Simply follow our Vialto Alerts page on LinkedIn and posts will be displayed on your feed. To ensure you don’t miss one, once you’re on our LinkedIn page, click on the bell icon under the banner image to manage your notifications.

Further information on Vialto can be found here: www.vialtopartners.com

Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

© 2026 Vialto Partners. All rights reserved.