Budget 2027: Rewarding work and investing for the future

Measures to support enterprise and SMEs

As part of a package to promote investment in the Irish economy, the Minister announced a number of measures:

Reduction in rate of CGT

The standard rate of Capital Gains Tax (CGT) will be reduced from 33% to 31% effective as of midnight tonight. There will be no change to the 33% rate which applies to the disposal of development land in Section 649A of the TCA 1997.

Relief for investment in Irish Business

Subject to adoption of the new EU State Aid General Block Exemption Regulation, the Minister indicated that the Government intends to extend existing reliefs for investors in Irish private businesses, the Employment Investment Incentive (EII) the Start-Up Capital Incentive (SCI), the Start-Up Relief for Entrepreneurs (SURE), and the Relief for Investment in Innovative Enterprises (also known as Angel Investor Relief).

Company start-up relief

In addition to extending relief for investors in Irish business, the Minister indicated that he would also be extending Relief for Start-Up Companies. Subject to certain conditions being met, this relief provides start-up companies with relief from corporation tax on trading income (and certain capital gains) in their first five years of trading.  Full relief is available for corporation tax liabilities up to €40,000, with marginal relief applying for corporation tax liabilities between €40,000 and €60,000.

Changes to R&D Tax Credit

Recognising that Ireland’s research and development (R&D) tax credit remains a cornerstone of Ireland’s corporate tax policy, the Minister indicated that, in line with the R&D Compass published in January 2026, the following improvements would be made to the regime: 

• The existing limits on the cost of subcontracting R&D activities to third level institutions and third parties will be increased from 15% of qualifying in house R&D expenditure or €100,000, to 20% or €200,000.
• To improve cashflow for start-ups, the first-year repayment threshold will be increased from €87,500 to €105,000.
• Changes will be made to the way in which R&D tax credits are recognised for preliminary tax purposes which should provide cashflow benefits to claimant companies
• A new provision will allow claimant companies to increase their qualifying cost base by an amount equal to 5% of qualifying R&D wage costs, provided they have incurred sufficient expenditure.
• Changes will be made to confirm that where a clinical trial is regulated, this fact may be used to satisfy the science test in order for the work to be recognised as qualifying R&D activities.

Knowledge Development Box

Ireland’s Knowledge Development Box (KDB) regime will be extended until 1 January 2032.

Recognising that there has been significant changes to international tax rules since the introduction of the KDB, the Minister indicated that taxpayers within the regime will be given an option to opt out of the regime for a limited time subject to certain conditions being met. 

Measures to promote retail investment

Launch of new SIAs

The introduction of the new savings and investment account (SIA) has been one of the most anticipated changes of Budget 2027. In August, the Department of Finance published its ‘Roadmap for the Taxation of Retail Investment’ (the Roadmap) which set out the key features of SIAs (see our Insight on the Roadmap here).

SIAs will operate outside the existing regime for taxation of retail investments and will, instead, be subject to their own specific tax regime. Income and gains within the SIA will not be taxed on an arising basis, instead an annual flat rate of tax will be applied to the amount by which the value of investments held within an SIA exceeds a tax-free threshold amount.

The Minister in his speech confirmed that a flat 1% tax will be charged on the value of investments in SIAs above a tax-free threshold of €50,000. While there will be no minimum contribution, a maximum contribution of €12,000 will be capable of being invested in an SIA annually.

The new accounts will become operational from 1 July 2027. Account providers will be required to manage all tax reporting, administration and payment on behalf of account holders.

Companies looking to become providers of these new accounts will have to wait until the publication of the Finance Bill for a full overview of how the accounts will operate in practice and for details of what additional measures, if any, they will need to navigate when implementing the new scheme. 

Other measures to simplify the landscape for retail investors

The Funds Sector 2030 Report, published by the Department of Finance on 22 October 2024, made several recommendations on how Ireland’s existing regime for fund investments could be simplified to promote investment by retail investors. Amongst the recommendations made was a reduction in the rate of Investment Undertaking Tax (IUT) and Life Assurance Exit Tax (LEAT) to align these taxes with the CGT rate. This recommendation was again considered by the Government in the Roadmap.

Last year’s Budget saw both IUT and LEAT reduced from 41% to 38%, and the Minister today announced a further reduction from 38% to 35%, coming into effect from 1 January 2027.

Measures to support workers

A number of targeted measures were introduced to provide income tax relief to workers, including a €2,500 increase in the standard rate band and €125 increases in the Personal, Employee and Earned Income Tax Credits. The ceiling of the 2% USC band will also increase from €28,700 to €30,300, with the changes taking effect from 1 January 2027.

Simplifying Tax Administration for Business

Interest Deductibility

The Government published an Action Plan for Reform of Ireland’s Taxation Regime for Interest (the Action Plan) on 7 October 2025. The Action Plan was followed by a Feedback Statement outlining strawman proposals for the reforms and a public consultation was opened in November 2025 in which stakeholders were invited to comment on the reform proposals.

Although both the Action Plan and the Feedback Statement indicated that Phase One proposals would be implemented in this year’s Finance Bill, the Minister in his speech only announced some technical amendments aimed at simplifying the existing provisions governing interest relief on borrowings taken out for certain lending and investment activities.

We expect to see the details of what exactly these technical amendments will be once Finance (No. 2) Bill 2026 is published next week.

Corporation Tax – Preliminary Tax

To reduce the administration burden on companies and improve flexibility for companies, the following changes will be made to the preliminary tax regime for CT payors:

• An extension to the current limited top-up mechanism, to provide that preliminary tax requirements are satisfied where at least 80% of the current year liability has been paid by the final preliminary tax instalment date and a top-up payment to reach 100% of the liability is made within four months of the end of the accounting period.
• Removal of a 45% deeming provision, such that an underpayment of the second instalment of preliminary tax does not result in a deemed underpayment of the first instalment, where the first instalment payment was not of an amount at least equal to 50% of the prior year liability. 
• An increase in the small company threshold from €200,000 to €350,000.  

eWithholding taxes

Budget 2027 also includes modernisation measures for Ireland’s withholding tax regime. This follows the public consultation held by the Department of Finance and the Revenue Commissioners of Ireland (Irish Revenue) on reform of withholding tax at the start of 2026.

The Minister confirmed that for self-employed individuals, the current flat withholding rate of 20% of Professional Services Withholding Tax will be replaced with Personalised Deduction Rates (PDRs). This PDR will be applied to each payment and will ensure that the amounts withheld on each payment are then more reflective of the actual tax liability due on that payment. It is hoped that this reform will reduce overpayments and the administrative burden of claiming refunds.

Although not specifically addressed as part of the Minister’s Budget speech, Irish Revenue publications on e-Withholding indicate that a new lower flat rate of withholding may apply for corporate and non-corporate entities (non-individuals).

While the Department of Finance had in their Tax Strategy Group Papers, published in July 2026, suggested that PDRs may also be introduced for Relevant Contracts Tax, this amendment did not materialise in the Budget speech.

Enhanced Reporting Requirements (ERR)

Following on from recommendations made by the Cost of Doing Business Advisory Forum, changes will be made to Enhanced Reporting Requirements (ERR) to provide employers with more flexibility. From 1 January 2027, employers will be able to choose to continue to operate these reporting requirements in real time or make monthly returns instead.

Measures to promote home building

As with previous Budgets housing was a key focus. However, unlike last year’s Budget, which saw the introduction of targeted measures to promote home building, this year’s Budget contained focused measures targeting dereliction.

New Derelict Property Tax

A new derelict property tax will be introduced. The tax will be administered by Irish Revenue and will be based on registers of dereliction prepared by Local Authorities. The Minister indicated that the tax will be a 7% per cent tax and will apply to residential and non-residential property. Irish Revenue will be entitled to use its full range of powers to ensure compliance with the new tax.

Documentation published alongside the Minister’s speech provided the following timeline for implementation:

• 1 January to 31 August 2027: Local Authorities inspect the relevant towns and identify derelict properties.
• 1 September 2027: Preliminary registers of derelict properties are published.
• 1 September 2027 to 30 November 2027: Property owners can seek review of inclusion on register.
• 1 September 2027 to 29 February 2028: Local authorities decide on reviews.
• 1 March 2028: Final registers of derelict properties published and Irish Revenue pay and file window opens.
• 23 June 2028: First pay and file deadline.

Changes to Residential Zoned Land Tax (RZLT)

RZLT was introduced in Budget 2022 and become effective on 1 January 2025. Finance (No. 2) Bill 2026 will give owners of land included an opportunity to seek to have land rezoned to reflect a genuine economic activity being carried out, thus bringing the property outside the charge to RZLT. 

Other measures

• Pillar Two – Side by Side Package

As expected, the Minister confirmed that Finance (No. 2) Bill 2026 will provide for the introduction of the Pillar Two Side-by-Side (SbS) Package. Subject to the enactment of Finance (No. 2) Bill 2026, the SbS Safe Harbour is expected to apply in Ireland for accounting periods commencing after 1 January 2026. 

• Bank Levy

The bank levy will be extended for a further year with a target yield of €200m. 

• Capital Acquisitions Tax

Budget 2027 will see a modest increase in the Group A tax-free threshold, which applies to gifts and inheritances from parent to child, from €400,000 to €420,000. Similar increases will see the Group B tax-free threshold increase from €40,000 to €44,000 and the Group C tax-free threshold increase from €20,000 to €22,000.

For more information, please contact any member of the  ALG Tax team.

Date published: 6 October 2026