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The Minister for Public Expenditure has given a strong signal that the tax package in the budget is not due to change much this year. Alamy Stock Photo
Budget 2026
Budget latest: Don't expect much in income tax cuts this year
Sources confirmed that social welfare payments also won’t rise at the same level as last year.
THREE WEEKS OUT from Budget Day and the message from government is people should not be expecting the same level of income tax cuts as last year.
At last year’s Fianna Fáil think-in, ministers were chanting that the average worker would get €1,000 back into their pockets.
At this year’s party meeting in Cork, taking place today, there are no such promises being made.
Instead, Public Expenditure Minister Jack Chambers said the €9.5bn budget package would not be increasing, stressing the limited capacity of the €1.5bn tax package.
He said providing a figure, as ministers did last year, is “more challenging this year, to be frank, in that we’ve been clear from a tax perspective, there’s a number of measures which Minister [Paschal] Donohoe is advancing around the R&D tax credit and the VAT measure that leaves a more limited scope for specific changes in income tax”.
The focus will be savings through the social protection system, said Chambers, who added that “the nature of the tax package will be a little different this year”.
Social welfare payments
As reported by The Journal last week, social welfare payments, including the pension, are not set to increase by the same amount they did last year.
Last year, the pension and other payments rose by €12 per week, but sources indicate a €10 rise is more realistic now.
One senior source said that the government would rather a slower, more gradual increase rather than have to cut payments if the economic situation changes in the year to come.
Fine Gael has also been pushing for jobseekers’ payments not to increase this year in step with other social welfare payments – but Fianna Fáil sources indicated today that such a move won’t be countenanced.
‘Limited scope’
When it comes to indexation of tax bands, which is something promised in the programme for government, Chambers said today: “There’s more limited scope this year than last year, and I think we have to be responsible in managing the risks that are there in the Irish economy.”
He indicated that while the government has committed to the VAT reduction for hospitality, it makes sense to sequence it, indicating that the measure won’t kick-in until the middle of next year.
This opens up some headway for government in terms of some taxation measures.
When it comes to renters, Chambers told reporters today at the Fianna Fáil party think-in that the experience of renters is a real priority for the party.
The existing renters’ tax credits are under a sunset clause, which Minister Donohoe will have to examine in the context of the overall tax package, he said.
“I know that’s something he’s seriously considering around the existing level of support and indeed, if there’s scope for further additional renters’ tax credits,” he said.
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