Income Tax Rates, Bands, Tax Credits and Exemption Limits
No changes were made to the main Income Tax rates, Income Tax Bands or the majority of Income Tax Credits (e.g. the Personal Tax Credits, Employee Tax Credit (PAYE Credit) and Earned Income Credit for the self- employed, Home Carer Tax credit, Single Person Child Carer tax credit, Incapacitated Child credit, Dependant Relative tax credit, Blind Person tax credit, etc).
The rate of tax that applies to Irish domiciled funds and life assurance policies and equivalent offshore funds and foreign life policies will reduce from 41% to 38%.
This change will be effective from 1 January 2026.
Minister Donohoe also stated that he intends to publish a roadmap early in 2026 setting out the intended approach to simplify and adapt the tax framework in relation to investment by retail consumers of these products.
This would be a welcome change as the current Irish and offshore fund tax regime is unnecessarily complicated. However it remains to be seen how the taxation regime will be simplified.
Pay Related Social Insurance (PRSI) & Universal Social Charge (USC)
While not part of the Budget speech, (as these rates changes were already legislated for in the Social Welfare Miscellaneous Provisions Act 2024), the rates for all classes of PRSI will increase initially by 0.1 percentage point from 1st October 2024, followed by further increases from October 2025 to October 2028.
The proposed rate changes are as follows:
| YEAR | EMPLOYEE | EMPLOYER |
| 2024 | 4.10% | 11.15% |
| 2025 | 4.20% | 11.25% |
| 2026 | 4.35% | 11.40% |
| 2027 | 4.50% | 11.55% |
| 2028 | 4.70% | 11.75% |
The 2% USC band has been widened so that it applies on income of €12,013 to €28,700. This is to ensure that people on the increased national minimum wage will not see the recent increase push them into the 3.0% USC band.
All USC changes are effective from 1 January 2026.
Rent Tax Credit
The rent tax credit is not being increased from it’s current level of €1,000, or €2,000 in the case of a jointly assessed taxpayer. However it’s availability is being extended until the end of 2028.
The credit will continue to be available to parents who pay for their student children’s rental accommodation in the form of ‘digs’.
Mortgage Interest Relief
Minister Donohoe announced the extension of the mortgage interest tax relief initially announced in Budget 2024 by a further two year to 31 December 2027.
Relief will continue to be available at a rate of 20% in respect of the increase in interest paid in the calendar year 2025 compared to calendar year 2022 and continues to be capped at a maximum credit of €1,250. This credit can be claimed in 2026. A reduced tax credit subject to a maximum credit of €625 will be available in respect of the increase in interest paid in the calendar year 2026 compared to calendar year 2022 and this credit can be claimed in 2027. This remains available to qualifying homeowners with an outstanding mortgage balance in respect of their principal private residence of between €80,000 and €500,000.