CAPITAL GAINS TAX will not be applied to returns made through a new savings and investments scheme being developed by Tánaiste and Minister for Finance Simon Harris.

The scheme is being designed to incentivise Irish people to invest by creating a scheme that would remove some of the barriers currently in place.

Plans for the scheme are set to be approved in the first half of this year and form part of the proposals for Budget 2027.

At cabinet last week, ministers were told that the preferred model being examined for the new savings scheme is the Swedish system known as Investeringssparkonto (ISK).

Under this scheme, zero tax is applied to income or gains arising out of investments.

ISK users pay a standard tax rate on their accounts, usually equivalent to just under 1% of the fund value. The rate is linked to Sweden’s government bond yield and so can rise or fall slightly, but is normally about that level.

In return for the small flat tax, account holders do not have to pay fees on individual trades. As no tax is due on trades, transactions do not have to be tracked, making investing much more straightforward. There is also no capital gains tax due on profits.

Crucially, no tax is due on the first 300,000 SEK (€28,000) held in an ISK.

The tax rate on the value of assets under the Swedish ISK model is currently 1.065%.

Ministers were told that this model is seen as the “best in class” and that is actively being examined as part of work being undertaken in the Department of Finance.

The new scheme will promise a “beneficial tax treatment for a range of investments”, acting as a “one-stop shop” for retail investors.

While Irish people are among the best savers in Europe, holdings in investments are just above 2.2%, according to data presented to Cabinet.

There is around €170bn currently sitting in deposit accounts across banks and credit unions. These traditional savings accounts typically offer low interest rates, despite rising inflation.

Harris will outline the next steps for the new scheme at the first Annual Savings and Investment Forum in Dublin on Tuesday.

Related Reads

Ireland is planning a new savings scheme: How do they work elsewhere and how much could you earn?

Simon Harris' saving scheme plan: 'It could make Irish savings work harder, if done properly'

Why is private investing so complicated in Ireland?

He previously told The Journal that new scheme will allow “middle Ireland for the very first time to be able to invest in a way that is convenient, and that can match the risk appetite”.

A spokesperson said the Fine Gael leader said: “The Tánaiste believes we need to strengthen Ireland’s investment culture, giving people real opportunities to make more of their hard-earned money.

“On Tuesday, he will convene the first ever Savings and Investment Forum – bringing together all the key industry and policy stakeholders who will feed into the roadmap process of establishing a new investment account.”

They added: “Empowering people to make their savings go further is a priority for the Tánaiste and he was very pleased to have an opportunity to update Government on his work in this area at for this body of work at Cabinet this week.

“In a very volatile and uncertain world we live in, it is becoming more important that we build resilience, not just at a national level but also a family level. The Tánaiste believes this is a very important tool to achieve this.”