Ireland’s 2027 Budget: What it means for your business

Ireland’s 2027 Budget, Simon Harris’s first as Minister for Finance, has been delivered. Pitched as a budget that balances the challenges of global volatility with securing Ireland’s future and rewarding hard work, the announcements demonstrated a clear focus on home-grown businesses with ambitions to grow.

Ahead of the Budget, we asked whether this would be the pro-SME budget we’d hoped for. While it doesn’t deliver everything, many of the changes will benefit businesses.

In this article, we examine the announcements from Ireland’s 2027 Budget and what they mean for your business.

The key announcements from Ireland’s 2027 Budget

Capital Gains Tax

• The standard rate will be reduced from 33% to 31%. This reduction in the CGT rate applies in respect of disposals made on or after 7 October 2026.  There will be no change to the 33% rate which applies to the disposal of development land.

Ireland Strategic Investment Fund (ISIF)

• ISIF is launching a €1 billion investment programme aimed at building the next generation of Irish companies that can grow internationally.  In co-ordination with Enterprise Ireland, ISIF will invest through a range of channels in Irish businesses.

Enhanced Reporting Requirements (ERR)

• From January 2027, businesses will have the option to move from real-time reporting to monthly reporting, reducing the administrative burden on this relatively new Revenue requirement.

Investment reliefs

Subject to the adoption of the new EU State aid General Block Exemption Regulation, the Employment Investment Incentive (EII), the Start-Up Capital Incentive, Start-Up Relief for Entrepreneurs (SURE), and the Relief for Investment in Innovative Enterprises (known as Angel Investor Relief) will all be extended.

Start-up relief

• The corporation tax relief for small start-up companies will also be extended.

Professional Services Withholding Tax

• Personalised deduction rates will be introduced in place of the flat 20% withholding rate.

Preliminary tax

• Changes to the preliminary tax rules, reducing the burden on smaller enterprises, are expected in the Finance Bill.

R&D Tax Credit

• The limits on subcontracting to third-level institutions and third parties will increase from 15% to 20%, and from €100,000 to €200,000. The first-year payment threshold will rise from €87,500 to €105,000, providing cash flow support for businesses.

Knowledge Development Box

• The Knowledge Development Box regime will be extended for a further five years.

Rural Pubs

• If you run a pub based in rural Ireland, keep an eye out for future announcements following today’s commitment to dedicate €15 million to keeping ‘pub doors open’, a reflection on the value of the local pub to rural communities.

Income Tax

• Standard rate cut off up €2,500 to €46,500, with proportionate increases for married couples and civil partners.
• Personal, employee, and earned income tax credit up €125.

USC

• Increasing the entry threshold for the 3% band of USC up €1,600 from €28,700 to €30,300.

Minimum Wage Increase

• Minimum wage increases from €14.15 per hour to €14.94.

Rent Tax Credit

• The rent tax credit will rise by €150, bringing it to €1,150 for single claimants and €2,300 for jointly assessed couples.

Rent a Room Relief

• Rent a room relief ceiling is to be increased to €16,000 from 1 January 2027.  The relief is to be extended to certain auxiliary/modular dwellings installed after 27 July 2026.

Employer PRSI

• The principal employer PRSI measure announced in Budget 2027 was an increase in the threshold at which the higher rate of employers PRSI applies from €552 per week to €600 per week in 2027.
• Raising the threshold to €600 means that as the minimum wage rises, lower-paid employees will stay within the reduced rate, rather than tipping employers into the higher one. However, it is worth noting that Budget 2027 did not reverse the increases of 0.1% in employee and employer PRSI rates which took effect from 1 October 2026  or the further increase in PRSI contribution rates of 0.15% for both employers and employees scheduled for 1 October 2027, as previously announced and legislated for.

Capital Acquisition Tax Thresholds (Gifts and Inheritances)

Business owners planning to pass their business or assets on to family will welcome the increases to the Capital Acquisitions Tax (CAT) thresholds, which apply to both gifts and inheritances:

• Group A (children) rises from €400,000 to €420,000
• Group B (siblings, nieces, nephews, grandchildren and parents) rises from €40,000 to €44,000
• Group C (everyone else) rises from €20,000 to €22,000

Pension Taxation

• We can expect further announcements on pension taxation in the Finance Bill.

Irish Investment Account

• The much-anticipated Irish Investment Account will launch on 1 July 2027, with the enacting legislation to follow in the Finance Bill. Modelled on similar schemes in the UK and Sweden, it is designed to make investing accessible to all, with no minimum investment required.
• Individuals can contribute up to €12,000 a year. The first €50,000 in the account is tax-free, and a flat rate of 1% applies to the value of the account above €50,000.
• Investments held in the account will be exempt from capital gains tax, dividend withholding tax, investment undertaking tax and life assurance exit tax. The deemed disposal rule will also not apply,
• For company directors it will offer a straightforward way to diversify investments while benefiting from the tax benefits outlined above.

Irish Funds

• The Government also announced a reduction in the rate of tax that applies to investments in Irish and equivalent offshore funds, as well as Irish and foreign life assurance products. From 1 January 2027, the rate of Investment Undertaking Tax and Life Assurance Exit Tax will fall from 38% to 35%.
• The measure supports investment by Irish individuals, and represents a further boost to Ireland’s funds industry, which holds approximately €7 trillion in assets under administration, supports 20,000 jobs and is home to just under a thousand fund promoters.

Increased certainty on Carbon Tax

• The Minister announced a cut to the carbon tax rate on kerosene and natural gas, from €63.50 to €48.50 per tonne of CO2. These rates had been due to rise twice, reaching €78.50 per tonne by 1 May 2027. The reduced rate will instead be held for the lifetime of the Government, giving businesses and households certainty over energy costs.

Fuel

• The temporary reductions in fuel excise, which were due to end in November, have been extended in full until 28 February 2027. Excise will then be restored gradually in four phases, with rates not returning to full levels until 30 June 2027. This is in addition to the extension of the reduced NORA levy and the enhanced Diesel Rebate Scheme, both of which will now run until 31 December 2026.

Electric Vehicles

• For companies looking to invest in electric vehicles, VRT relief on EVs has been extended for a further two years, until 31 December 2028. To encourage the move to lower-emission cars, VRT rates on higher-emitting vehicles in bands 3 to 20 will rise by 1%.

Charities Sector

• Charities will welcome an increase in the annual cap on the VAT Compensation Scheme for Charities, from €10 million to €15 million. The scheme allows charities to claim a refund of a portion of their VAT costs, based on their level of non-public funding.

How can AAB help you navigate Ireland’s 2027 Budget

At a time of market volatility and uncertainty, but also real economic strength, we’ll work with you to make the most of the tax reliefs announced and access the supports that can help your business grow.

If you have any questions about any of the announcements from Ireland’s 2027 Budget and how they’ll affect you or your business, please do not hesitate to contact Nuala Kenny, Rachel Barry or your usual AAB contact.

Keep up to date with everything you need to know about Ireland’s 2027 Budget through our dedicated hub.