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IN JUST UNDER a month’s time, the government will unveil the budget for 2026.
While last year’s pre-election budget was described as a give-away by some, expectations for this year are being tempered.
Government has been at pains to emphasise uncertain economic winds that might be coming our way, and with US tariffs coming in at 15% a more cautious approach is being taken.
This year’s €9.4 billion package includes €1.5 billion in tax cuts and a €7.9 billion spending package, an increase of 7.3% for next year.
Despite these figures being modelled at a 0% US tariff scenario, Taoiseach Micheál Martin indicated this week that he didn’t think the numbers would change. But we’ll see as we get closer to October.
While Budget Day is just a few weeks out, there are some things we know already. So, what can we expect?
First of all, once-off measures such as the energy credit and the double child benefit payment appear to be off the table.
Finance Minister Paschal Donohoe has repeatedly said that government won’t be rolling these out again. Instead, government has said they want savings to be put on a more permanent structure.
One measure that might try and fill that hole for some families is a proposed change to the child benefit system.
The Taoiseach confirmed this week that a change, in some form, will be introduced.
However, Social Protection Minister Dara Calleary clarified today that while a second tier child payment is a commitment in the programme for government, he won’t have the work completed before October’s budget day. He said he was confident the proposal will be brought before government before Budget 2027. He did indicated targeted measures would be rolled out.
Government ministers were at pains to tell us last year that the budget would see the average worker getting at least €1,000 in income tax reductions and cost-of-living payments. Don’t be expecting the same this year.
Donohoe said the upcoming budget aims to focus on the creation of jobs and delivery of infrastructure to future-proof Ireland’s economy.
Tánaiste Simon Harris has indicated that there will be some movement, pointing to the programme for government commitment that “progressive changes” will be made in taxation, “including indexing credits and bands to prevent an increase in the real burden of income tax”.
However, the changes are not expected to be as significant as last year.
One thing ministers have been very clear about is they plan to bring the VAT rate for the hospitality sector back down to 9% from 13.5%.
The lower rate was introduced to help the sector recover from the pandemic, but was increased in August 2023.
The measure will cost a lot of money and eat up a big chunk of the tax package.
Harris said this week that government has no intention of reducing the VAT rate for hotels, with the move instead aimed at restaurants and cafes, despite there being little or no evidence to show its benefit.
With warnings of tighter purse strings and minimal tax cuts in this year’s budget, government sources have indicated that a weekly social welfare hike of €10 is more realistic for Budget 2026 than what people received last time round.
In last year’s budget, all weekly social welfare payments (including jobseekers benefit and allowance, illness benefit, disability allowance, and others) increased by €12.
This year however, across the board hikes look like they’ll be below that rate.
The rent tax credit of €1,000 per person – or €2,000 for a couple – is likely to rise again, especially due to the changes to rent regulations announced earlier this year.
In an interview with The Journal, prior to the election, Martin pledged to boost the Renters’ Tax Credit to €2,000 per person.
Fine Gael, in its election manifesto promised to increase Rent Tax Credit to €1,500 per renter or €3,000 per couple, to support tenants in managing expenses.
In the programme for government, there is a commitment to progressively increase the Rent Tax Credit.
The government’s new housing plan is also set to be announced around budget time and is expected to announce some changes around the government schemes.
During the election campaign, a number of parties, including Fine Gael, promised to cut the costs to families and introduce a €200 cap for parents.
Harris recently said that in the coming weeks, an action plan will be published that will outline how the government plans to proceed in lowering costs.
“And I believe Budget 2026 has to move forward in terms of advancing those commitments. Getting childcare right is important. It’s important for families, it’s important for society, and it’s important for our economy,” he said.
Backbenchers are pushing for changes in to the inheritance tax system in the budget, with some looking for the estates of people with no children to be dealt with.
Harris has said he believed the inheritance tax thresholds are “unfair” but didn’t go so far as stating there would be changes made this year. Last year the threshold was changed for children, allowing them to inherit €400,000 from their parents before paying capital acquisition tax (CAT) kicks in.
It is understood government is minded to move towards hitting a €500,000 threshold during the lifetime of this government, so some incremental change might be on the cards.
There has been some controversy over third level fees this year, which has been reduced from €3,000 to €2,000 over the past three years.
It is due to revert to €3,000 for this year, something which ministers have been criticised over. The government is likely to do something on this in the budget, as it has pledged to reduce the charge over its term.
A tax on e-cigarettes will form part of Budget 2026, something which Minister for Jack Chambers announced last year.
Government is set to double the price of e-cigarette refill cartridges, placing a €5 duty on the products, and add a €1 tax to disposable vapes next year, it announced last year.
Excise on cigarettes is also set to rise.
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