The Minister for Finance, Simon Harris, and the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation, Jack Chambers, presented the second Budget of the coalition Government on Tuesday.
Budget 2027 was Minister Harris’ first as Minister for Finance and comes against a backdrop of continued cost-of-living pressures. The Budget provided for an €8.5 billion package, including €1.65 billion in tax reductions aimed at easing cost-of-living pressures.
The measures announced are aimed at supporting communities, promoting economic growth, easing cost-of-living pressures and enhancing Ireland’s competitiveness in the global economy.
An overview of the key measures announced are set out below.
Income tax
The standard rate cut-off point has increased to €46,500 for single people and €55,500 for married couples/civil partners (one income ), meaning the higher 40% rate of income tax will start when income exceeds these amounts.
The Universal Social Charge (“USC” ) entry threshold for the 3% rate will increase from €28,700 to €30,300.
The main tax credits, such as the personal, employee and earned income tax credits have increased by €125, and the home carer credit has increased by €100.
We have outlined below the associated increases in the tax credits along with the benefit arising from the above changes.
Social welfare and related measures
The minimum wage will increase by €0.79 per hour, rising to €14.94 per hour with effect from 1 January 2027.
There will be an increase of €10 in Social Protection payments.
All recipients of the normal weekly fuel allowance will receive an additional €5 per week.
Recipients of the Living Alone Allowance will receive an additional €3 per week.
An annual cost-of-disability payment of €500 has been introduced.
The Carer’s Allowance income disregard will increase by €150 to €1,150 for a single person and by €300 to €2,300 for a couple.
The Child Support Payment will increase by €6 per week.
The Working Family Payment weekly income thresholds will increase by €30.
Capital Acquisitions Tax (“CAT” )
The CAT thresholds have been increased to the following amounts:
Category A – €420,000 (generally gifts/inheritances from parents to children ).
Category B - €44,000 (generally gifts/inheritances from relations ).
Category C - €22,000 (generally gifts/inheritances from non-related individuals ).
Capital Gains
Tax (‘’CGT’’ ) and Deemed Disposals
Capital gains tax rate has been reduced from 33% to 31%.
Investment Undertaking Tax and Life Assurance Exit tax or ‘deemed disposals’ for holders of existing investment products has reduced from 38% to 35%.
Housing
A new Derelict Property Tax will be introduced from September 2027 at a rate of 7% of the self-assessed value of the property.
First time buyers will see the maximum Help-to-Buy relief increase from €30,000 to €35,000 toward the deposit on their first home.
The Rent Tax Credit will increase by €150 to €1,150 for individuals and by €300 to €2,300 for couples.
The Rent-a-Room Relief threshold will increase to €16,000 and will be extended to include newly installed detached auxiliary dwellings.
€2.2 billion will be allocated to support the social housing needs of 110,000 households and provide emergency supports for those experiencing homelessness.
€3 billion will be provided for the delivery of social housing, including 11,250 new-build social homes.
Education/Childcare
Third level student fees will be permanently reduced by €150.
Grant eligibility will be expanded for families with more than one child attending third-level education, including increase to SUSI maintenance grant rates from January 2027.
An additional €17 million will support schools with day-to-day running costs.
Additional funding will support over 1,420 new higher-education places in key health and social care areas, alongside expanded apprenticeship provision.
€56 million will be provided for an additional 2,339 Special Needs Assistants in 2027, alongside 1,353 additional teachers.
Maximum childcare fees will be reduced from €735 to €550 for children up to senior infants.
The tax exemption available under Childcare Services Relief will increase by €5,000 to €20,000.
Health
An additional 930 staff will strengthen disability services and improve access to supports for service users and their families.
A further 489 residential care packages will be provided along with 1,500 new day service places.
An additional 33,000 hours of free counselling will improve access to community-based mental health services for men, young people and the LGBTQ+ community.
1,420 additional higher education places in key health and social care professions.
Business tax incentives
The Research and Development (R&D ) tax credit has been amended to include enhancements such as the subcontracting limits for third-level institutions and unconnected third parties will increase to 20% or €200,000, and improvements to the first-year payment threshold.
A €1 billion investment programme will be launched by the Ireland Strategic Investment Fund to support the development of the next generation of large Irish companies.
The Knowledge Development Box regime has been extended to 1 January 2032.
For preliminary tax purposes, the threshold for a company to be deemed a ‘small company;’ is increasing from €200,000 to €350,000.
The Accelerated Capital Allowances scheme for farm safety equipment has been extended to 31 December 2029 and provides allowances of 50% per annum on qualifying equipment, with further items added to the list of eligible equipment.
Tax relief for Start-Up Companies is being extended to 31 December 2030.
€15 million has been allocated to support rural pubs.
VAT
The flat-rate farmer VAT compensation scheme will increase to 4.8%.
VAT on the supply of respiratory vaccines for livestock will reduce to 9%.
The VAT Compensation Scheme for Charities is being increased from €10million to €15million.
Climate/Energy
Vehicle Registration Tax (“VRT” ) relief for electric vehicles will be extended for a further two years, to 31 December 2028.
VRT rates for higher-emission vehicles in bands 3 to 20 will increase by 1%.
€654.5 million will be allocated to SEAI residential and community energy upgrade schemes.
The restoration of excise duties on petrol and diesel will be postponed from 1 November 2026 to 28 February 2027.
Carbon tax on auto fuels, which had been due to rise to €78.50 per tonne this year, will be deferred to May 2027.
Carbon tax on kerosene and natural gas will be reduced to €48.50 per tonne until 2030.
State Investment Scheme
From July 2027, a new tax-efficient investment scheme will allow annual contributions of up to €12,000, with funds up to €50,000 tax-free and a 1% annual tax on amounts above this threshold, regardless of investment performance.
Other
The excise duty on a packet of 20 cigarettes will be increased by €1, with a pro-rata increase on other tobacco products.
A domestic tax of €0.20 per ml of e-liquid will be introduced on e-cigarettes.
A new 25% excise duty on commissions from totalisator or pool betting will apply from 1 January 2027, with on-course pool bets exempt.
This article was compiled by Finnian O’Toole and Louise Egan of KPMG, Dockgate, Dock Road, Galway. Tel: 091-534600. For further information on Budget 2027 log on to: kpmg.ie/budget2027
