Budget 2026 marks a shift in policy towards supporting business and enterprise, moving away from the cost-of-living measures that defined previous budgets. This shift comes as Irish SMEs face not only domestic challenges but also heightened international tax risks, particularly the introduction of new US tariffs on EU goods. These external pressures add uncertainty for exporters and supply chain-dependent businesses, making the government’s business-focused approach especially timely.

A notable area in this year’s budget is the introduction of mandatory e-invoicing for business-to-business transactions. This aligns Ireland with EU digitalisation initiatives and aims to reduce administrative burdens, improve payment times, and enhance transparency for SMEs. E-invoicing is expected to modernise business processes and make it easier for SMEs to engage with the public sector.  More details to be announced shortly.

The construction sector is a major beneficiary, with the VAT rate on new apartments reduced to 9% until 2030 and an enhanced corporation tax deduction for apartment construction costs. These measures should improve project viability for SME builders and developers, while the extension of the Living City Initiative and the Residential Development Stamp Duty Refund Scheme further supports urban regeneration. However, these benefits are narrowly targeted, and SMEs in other construction areas may feel overlooked, especially as planning and regulatory challenges persist.

Beyond construction, the reduction of the VAT rate on food, catering, and hairdressing to 9% from July 2026 will benefit hospitality and personal services SMEs. The extension of the 9% VAT rate on gas and electricity until 2030, and an enhanced R&D tax credit, are further positives. The review of the interest deduction regime could be a game-changer for SME financing, but its impact will depend on the detail.

Despite these positives, some omissions – such as the lack of broad-based cost relief and measures to address wage, insurance, and regulatory burdens – will be seen as a missed opportunity. SMEs will be hoping for further action to support competitiveness and sustainability in the years ahead.

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The Government’s Summer Economic Statement, released in July, provided a clear indication of the fiscal parameters for Budget 2025, and for the most part, there have been few surprises.

The cost-of-living pressures and economic upheaval many have faced in recent years mean that both the Cost of Living and Social Protection packages, along with the USC rate cut, will offer a much-needed and anticipated boost for low to middle-income individuals, amounting to hundreds to euros.

The Housing Crisis continues to dominate  Budget 2025 announcements. The extension of the Help To Buy Scheme for first-time buyers until the end of 2029, along with an increase in the Rent Tax Credit, should assist in providing more certainty and security for both buyers and suppliers in the market.

From a business perspective, this year’s budget focused on reliefs to further encourage research, development and innovation, which will further assist in providing Ireland with a competitive advantage for attracting inward investment. The extension of the EIIS and Start Up relief incentives will also provide resilience and certainty for SMEs and start-up businesses.

Unsurprisingly, environmental sustainability remains one of the biggest challenges facing the current government. The tax incentives announced around ‘green initiatives’ are an unsurprising but essential step towards creating climate resilience in this country. Time will tell whether these measures are sufficient to drive the necessary shift, but there is no doubt that tax incentives will play an integral part in the government’s sustainability strategy in the coming years.

Finally, there was disappointment for SMEs, particularly the hospitality sector, with the absence of the much-lobbied-for VAT rate reduction. This omission is another setback for a sector that has faced numerous closures and hardship in recent months, with many calling for more targeted financial incentives in the budget.

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A giveaway budget it was not – but for this day at least everyone will feel a little better off, which is unusual.

Further widening of the tax bands and increased tax credits together with various amendments to the social welfare packages are acknowledgements of the cost of living pressures.

From a business perspective, the ‘a little for everyone’ theme is repeated. The most interesting element being the Increased Cost of Business Scheme, which will offer one-off grants up to 130,000 SMEs in the form of tiered grants equivalent to up to 50% of the commercial rates paid this year, with grants to be paid in early 2024.

The new targeted Capital Gains Tax relief for angel investors in innovative start-up SMEs allows angel investors to benefit from a reduced rate of CGT. The amendments to the Employment Investment Incentive scheme (EII) in standardising the investment period to four years for all investments and doubling the amount investors can claim relief on for four-year investments to €500,000 are welcome for smaller, early-stage businesses which are typically most in need of funding.

But as Michael McGrath said Budget 2024 was formed against a “backdrop of global uncertainty – both economic and geopolitical” so in reality every day seems like a Budget Day.

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Described by Paschal Donohoe as a “Cost of Living Budget”, Budget 2023 has focused on helping individuals and businesses deal with the inflation crisis. The Minister hopes to alleviate inflationary pressures without adding fuel to the fire – the success of which will only be possible to judge at a later date.

There was lots of pre-Budget talk about a new 30% income tax rate which hasn’t materialised. Instead, the Minister opted to leave the existing rates in place but has increased the standard rate bands. While Kwasi Kwarteng’s Budget strategies appear cavalier at best, Ireland’s competitiveness from an income tax perspective will be judged, at least in part, relative to our nearest neighbour.

Elsewhere, there was a strong focus on minimising the impact of the high rate of current inflation, with taxpayers being supported by increased tax credits, and a wider 20% band. In addition, a new yearly tax credit of €500 is to be introduced for renters in the private rental sector, with relief for rent paid in 2022 to be claimed next year.

From a business perspective, the small benefits exemption has been increased so an employer can now give employees up to 2 non-cash benefits tax-free each year subject to an overall maximum of €1,000. We also include an overview of the €1.4bn allocated to the new Business Energy Support Scheme (BESS).

There were welcome extensions to the KEEP and SARP schemes and some amendments to the R&D Tax Credit scheme to align with international norms and definitions.

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