Budget 2026: €9.4 Billion Package Delivers Welfare Rises, Housing Boost and VAT Cuts

Minister for Finance Paschal Donohoe unveiled a €9.4 billion Budget 2026 today, featuring a €10 weekly increase to social welfare payments, major housing investment exceeding €11 billion, and a significant VAT reduction for hospitality businesses from July. The package includes €8.1 billion in spending measures and €1.3 billion in tax changes, whilst maintaining budget surpluses and building long-term savings funds.

Budget 2026 - Easy Glance Table

Social welfare and household supports

Core social welfare rates will rise by €10 per week across all payments from January 2026, including the State Pension, with proportionate increases for qualified adults. Around 1.5 million recipients will receive a 100% Christmas Bonus in December 2025.

Minister Paschal Donohoe, Finance: "A €10 euro increase in weekly social protection payments, including for pensioners, people with disabilities, carers, jobseekers and lone parents, with proportionate increases for qualified adults."

The Child Support Payment will increase by €8 per week for children under 12 and €16 per week for those aged 12 and over from January. The Working Family Payment income thresholds will rise by €60 per week for all families, whilst Fuel Allowance increases by €5 per week with extended eligibility.

The national minimum wage rises by €0.65 to €14.15 per hour from 1 January 2026. The Rent Tax Credit has been extended to the end of 2028, and Mortgage Interest Relief continues for two more years with reduced value in the final year.

The 9% VAT rate on gas and electricity bills has been extended until 31 December 2030, continuing relief on energy costs for households across Cork and nationwide.

Housing investment reaches record levels

The Department of Housing will receive €11.3 billion in 2026, including €7.2 billion in capital expenditure. This comprises €2.9 billion for new-build social homes and acquisitions, alongside €2 billion for HAP, RAS and the Social Housing Current Expenditure Programme supporting over 100,000 households.

The government introduced several tax measures to boost housing supply. VAT on the sale of completed apartments drops to 9% from 13.5%, effective immediately until 31 December 2030. A new enhanced corporation tax deduction applies to apartment construction costs and conversions of non-residential buildings, available for projects starting between 8 October 2025 and 31 December 2030.

Cost-rental profits are now exempt from corporation tax for developments designated under the Cost Rental Scheme from 8 October 2025 onwards.

The Living City Initiative receives substantial changes, extending to 2030 and broadening scope from pre-1915 buildings to those built before 1975. The scheme now supports "over-the-shop" residential conversions, with the maximum relief for enterprises increasing from €200,000 to €300,000. Cork's city centre will benefit from these enhanced regeneration supports, with plans to extend the initiative to five additional regional centres including Athlone, Drogheda, Dundalk, Letterkenny and Sligo.

A new Derelict Property Tax will replace the existing Derelict Sites Levy, to be implemented and collected by Revenue. Preliminary registers will be published in 2027, with the tax implemented as soon as possible afterwards. The rate will not be lower than the current 7% levy.

The Residential Development Stamp Duty Refund Scheme extends to 31 December 2030, with time limits for large-scale developments increased from 30 to 36 months.

Business support and tax changes

The hospitality sector receives significant support through a VAT reduction from 13.5% to 9% for food, catering and hairdressing services from 1 July 2026. This measure will cost €232 million in 2026 and €681 million in a full year, supporting over 150,000 jobs across Cork and Ireland.

Minister Paschal Donohoe, Finance: "In line with the commitment in the Programme for Government to further support businesses and help them to retain jobs, I am reducing the VAT rate from 13.5 per cent to 9 per cent on food and catering businesses and for hairdressing services."

The Research and Development Tax Credit increases from 30% to 35%, with the first-year payment threshold rising from €75,000 to €87,500 to support smaller projects. An R&D compass will be published shortly, outlining targeted changes to better align with industry practices.

The Special Assignee Relief Programme extends for five years with the minimum qualifying income increasing to €125,000. The Foreign Earnings Deduction extends for five years, with relief increasing to €50,000 and the scheme expanding to include the Philippines and Türkiye.

Revised Entrepreneur Relief sees its lifetime limit on gains rise from €1 million to €1.5 million for disposals from 1 January 2026. The Key Employee Engagement Programme extends until end-2028, subject to European Commission approval.

A new stamp duty exemption applies to Irish SMEs and start-ups trading on regulated markets with market capitalisation below €1 billion, removing the 1% charge on share transactions.

The tax rate on Irish and equivalent offshore funds and foreign life assurance products reduces from 41% to 38%, encouraging retail investment. The Bank Levy extends for one year with a target yield of €200 million.

Health service expansion

The Health Service Executive receives an additional €1.5 billion, bringing the total to €27.4 billion for 2026. This funds 3,330 new whole-time equivalent staff positions across the health service.

At least 220 acute hospital beds will be added, including between 220 and 265 acute beds with dedicated provision for Bantry Hospital's stroke unit beds. At least 280 community beds will be delivered, alongside continued investment in community nursing unit refurbishment and reductions in community waiting lists.

Home support hours will increase by 1.7 million hours during 2026. Over 9,000 people will receive residential care, including 250 new placements. Close to 10,000 overnight and 15,000 day respite sessions will be provided for carers and families.

Mental health services see expansion, though specific allocations await detailed departmental breakdowns.

Education and childcare

The Department of Education receives €13.1 billion, funding 1,717 additional Special Needs Assistants for students with special educational needs. Standard capitation rates paid to schools will increase, with a new DEIS Plan and DEIS Plus scheme supporting children at risk of educational disadvantage.

Over 285,000 children will benefit from the National Childcare Scheme in 2026, an increase of approximately 35,000 children. Over 105,000 children will receive universal Early Childhood Care and Education.

Student contribution fees see a permanent €500 reduction, dropping from €3,000 to €2,500 for the academic year 2025/26 onwards, benefitting close to 108,000 students.

Further and Higher Education receives €4.9 billion, with increased funding for apprenticeship training to meet skills needs in housing and climate action sectors. The government will provide €1.4 million to establish a National Artificial Intelligence Office.

Transport and infrastructure

The Transport sector receives €4.7 billion, including €940 million for public transport services supporting the network across Cork and nationwide. Sustainable mobility receives €363 million for active travel and greenways, whilst roads and road safety get €1.7 billion for national and regional routes.

Regional airports receive a €40 million support package, with a new Dublin-Derry airlink commencing. Coast Guard and maritime safety capacity receives €163 million.

The National Development Plan commits €275.4 billion over the next decade, with €102.4 billion planned for the next five years. This includes €3.5 billion in equity funding to ESB Networks and EirGrid, €12.2 billion for water services, and €24.3 billion for transport including low-carbon projects like Metrolink.

Climate action and agriculture

Carbon tax rises by €7.50 to €71 per tonne of CO₂ emitted, applying to auto fuels from 8 October 2025 and other fuels from 1 May 2026. The increase generates €121 million additional revenue in 2026, ring-fenced for social welfare measures, retrofitting programmes and sustainable farming supports.

The Warmer Homes Scheme allocation has increased eleven-fold since 2020, with €558 million allocated for home energy upgrades in 2026. Over 140,000 households now have solar PV installed.

The €5,000 VRT relief for electric vehicles extends to 31 December 2026. Benefit-in-Kind relief on company cars continues on a tapered basis: €10,000 in 2026, €5,000 in 2027, €2,500 in 2028, before abolition in 2029. A new vehicle category for zero-emission cars will apply the lowest BIK rates.

Agriculture receives €2.3 billion, including €85 million for the Bovine TB Action Plan rollout. The ACRES scheme sees a €20 million funding increase, supporting 53,800 farmers. Farm Consolidation, Farm Restructuring and Young Trained Farmer reliefs extend to end-2029, with Farm Restructuring Relief expanding to include woodlands and forestry.

Justice and other measures

Justice and Home Affairs receives €6.2 billion, funding the recruitment of up to 1,000 trainee gardaí in 2026. Domestic and Gender Based Violence initiatives receive €11.5 million.

The Defence sector gets €1.5 billion, funding an additional 400 Permanent Defence Force members and 50 civilian roles.

Culture, Communications and Sport receives €1.5 billion, including €3 million for League of Ireland football academies and €1.6 million increased funding for inter-county Gaelic games players. A successor to the pilot Basic Income Scheme for the Arts will begin next year.

Rural and Community Development receives €0.6 billion, with €3.5 million increased current funding for Gaeltacht and Irish Language Support Schemes. The PEACEPLUS Programme receives an additional €3.8 million for cross-border projects.

Foreign Affairs expands Ireland's missions abroad to 107 in 2026, with official development aid increasing by €30 million.

Tobacco excise duty rises by €0.50 on a pack of 20 cigarettes from midnight, with pro-rata increases on other tobacco products. A new pool betting duty will be legislated in Budget 2027 following stakeholder engagement.

Economic outlook and public finances

The Department of Finance projects Modified Domestic Demand growth of 3.3% in 2025 and 2.3% in 2026. Employment remains at historically high levels with 2.8 million people at work, up 63,900 on last year. The unemployment rate is projected to remain around 5% through 2028.

Real wages continue to grow, with inflation forecast to remain around 2% next year. The government projects a general government surplus of €10.2 billion for 2025 and €5.1 billion for 2026.

The Future Ireland Fund and Infrastructure, Climate and Nature Fund will reach approximately €24 billion by end-2026, rising to over €40 billion by the end of the government's term.

Minister Paschal Donohoe, Finance: "This Budget will boost our resilience and protect jobs. It puts us in the best possible position to create a stronger and more competitive economy while meeting the needs of our people today and in the time to come."

Total voted expenditure for 2026 reaches €117.8 billion, comprising €98.7 billion current expenditure and €19.1 billion capital expenditure.