Budget 2026 has delivered a mixed bag of measures that will significantly impact how accountants and small businesses operate in the coming year. While some sectors benefit from targeted relief, others face increased costs and administrative burdens. Understanding these changes now will help you prepare for the adjustments ahead and identify new opportunities for your practice or business.
The Government has allocated €28.9 billion to social welfare spending while implementing a more measured approach to taxation changes, with the tax package reduced to €1.3 billion from the originally planned €1.5 billion. This shift towards targeted support rather than broad-based tax relief means accountants and small businesses need to understand which specific measures apply to their circumstances.
For accounting professionals, these changes present both challenges and opportunities. New VAT rates, revised tax credits, and updated employment costs will require system updates and client communications. Meanwhile, small businesses must navigate increased labour costs alongside beneficial rate reductions in key sectors.
Major Tax Changes Affecting Your Practice
VAT Rate Reductions Create New Opportunities
The most significant development for many small businesses is the reduction of VAT rates across several key sectors. From 1 July 2026, food and catering businesses, as well as hairdressing services, will benefit from a reduced VAT rate of 9%, down from 13.5%. This change will cost the Exchequer €232 million in 2026 and €681 million in a full year, indicating the Government’s commitment to supporting these sectors.
For accountants, this presents an immediate action item: clients in these industries need to understand the timing and implementation requirements. The delayed start date until July provides time to prepare systems and processes, but businesses should begin planning now for cash flow improvements and potential pricing adjustments.
Additionally, the reduced 9% VAT rate on gas and electricity bills has been extended until 31 December 2030, providing certainty for business energy cost planning.
Enhanced R&D Tax Credits Boost Innovation
The Research and Development tax credit increase from 30% to 35% represents a significant incentive for businesses investing in innovation. Coupled with the first-year payment threshold rising to €87,500, this change particularly benefits smaller companies developing new products or services.
Accountants should review their client base to identify businesses that could benefit from enhanced R&D claims. The administrative simplification allowing 100% of an R&D employee’s emoluments as qualifying costs where at least 95% of their time is spent on qualifying activities will streamline compliance for eligible businesses.
Capital Gains Tax Relief Expansion
The lifetime limit for Capital Gains Tax Revised Entrepreneur Relief increases from €1 million to €1.5 million from 1 January 2026. This represents a potential tax saving of €345,000 compared to the standard 33% rate for qualifying disposals.
This change creates planning opportunities for business owners considering exit strategies. Accountants should review client portfolios to identify those who might benefit from accelerated disposal timing or restructuring to maximise relief availability.
Employment Cost Increases Demand Attention
Minimum Wage and PRSI Changes
The national minimum wage increases by 65 cents to €14.15 per hour from 1 January 2026, representing a 4.8% increase that will directly impact small businesses with minimum wage employees. To prevent additional tax burden on these workers, the USC 2% rate band ceiling increases to €28,700.
Simultaneously, the employer PRSI threshold rises from €527 to €552 per week from 1 January 2026. While this provides some relief by reducing PRSI liability for lower-paid employees, the minimum wage increase will likely offset this benefit for most small businesses.
Accountants must update payroll systems and ensure clients budget for increased labour costs. For a business employing 10 minimum wage workers full-time, the annual increase amounts to approximately €13,520 before considering PRSI adjustments.
Planning for Increased Labour Costs
Small businesses should conduct immediate workforce cost analysis to understand budget impacts. Consider reviewing employee structures, productivity measures, and pricing strategies to accommodate higher employment costs. The combination of minimum wage increases with existing recruitment challenges means businesses need strategic approaches to workforce management.
Housing Sector Incentives and Property Tax Changes
Development Incentives
Budget 2026 introduces several measures targeting housing development that create opportunities for businesses in construction and property sectors. The VAT rate on completed apartments reduces from 13.5% to 9% until 31 December 2030, effective immediately from 8 October 2025.
Corporation tax exemptions apply to rental profits from Cost Rental Scheme homes from 8 October 2025, while enhanced corporation tax deductions are available for qualifying construction costs in apartment developments and conversions.
Derelict Property Tax Introduction
The replacement of the Derelict Site Levy with a new Derelict Property Tax, with rates expected to be at least 7%, affects property owners and creates compliance requirements. Accountants should identify clients with potentially affected properties and ensure proper classification and reporting procedures.
Additional Business Support Measures
SME Funding and Support Extensions
The Government allocated €200 million in extra funding for SMEs, particularly targeting housebuilders. Several business support programmes have been extended, including the Key Employee Engagement Programme (KEEP) until the end of 2028 and the Digital Game Tax Credit for six years to 31 December 2031.
The Section 481 Film Tax Credit enhancement introduces a 40% rate for productions with eligible expenditure over £1 million, applying up to £10 million per production. This creates opportunities for businesses in creative industries and those considering qualifying investments.
Accelerated Capital Allowances Extension
The extension of Accelerated Capital Allowances schemes for energy-efficient equipment until 31 December 2030 provides ongoing opportunities for businesses to claim enhanced deductions for qualifying investments while supporting sustainability objectives.
Other Key Takeaways
Social Welfare Package
The social protection package worth €27 billion includes a £10 increase across weekly social welfare payments, including the State pension. The Christmas bonus for long-term social welfare recipients will be paid at 100% of normal weekly payments, representing significant spending that may impact economic conditions.
Carbon Tax and Fuel Duty Increases
Carbon tax increases to €71 per tonne of CO2 emitted, adding approximately 2.5 cents to motor fuel costs from 1 May 2026. Cigarette duty increases by 50 cents per pack of 20. These changes affect business operating costs and consumer spending patterns.
Departmental Funding Allocations
Record-level funding includes €27.4 billion for Health, €13.1 billion for Education, over €5 billion for housing capital investment, and €4.7 billion for transport initiatives. This substantial public spending indicates continued economic activity but may pressure future taxation levels.
Financial Services Developments
Exit tax rates for Irish and offshore funds, ETFs, and life assurance policies reduce from 41% to 38%, though this remains higher than other withholding rates. The Minister plans public consultation in 2026 on simplifying the Irish Real Estate Funds (IREFs) regime.
Preparing for Implementation
Budget 2026 requires immediate preparation across multiple areas. Accountants must update systems for new VAT rates, revised tax credits, and changed employment cost calculations. Small businesses need to assess labour cost impacts, identify applicable reliefs, and plan for both challenges and opportunities ahead.
The focus on targeted rather than broad-based measures means detailed analysis of each client’s circumstances becomes more critical. Success in 2026 will depend on proactive planning and swift implementation of beneficial changes while managing cost pressures effectively.
Review your client base now to identify those most affected by these changes, and begin the essential conversations about planning and compliance requirements. The businesses that adapt quickly to these new conditions will be best positioned for growth in the year ahead.
