Overview:
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.
