Nicola Quinn: Was this a pro-business Budget?

To stay competitive, Ireland needs bold reforms that simplify tax and make it easier to do business

Wed, 08 Oct, 2025 - 00:12

Nicola Quinn

The introduction of tariffs and other global headwinds meant that Ministers Donohoe and Chambers faced an uncertain economic backdrop to Budget 2026.

With only €1.3bn available for tax measures, hard choices had to be made. This Budget had a significant focus on the key issue of housing and infrastructure delivery. It is also noteworthy that Minister Donohoe referenced protecting and creating jobs repeatedly in his budget speech, highlighting the importance of high levels of employment to the success of our economy.

Nicola Quinn: 'This was a budget for business, not for employees.'

In the critical area of housing, the Vat cut to 9% from 13.5% for new build apartments was welcome, and it is hoped this will help kickstart the building of stalled schemes. The exemption from corporation tax for rental income from cost rental properties, aiming to provide tenants with affordable rents, is also welcome. An enhanced corporation tax deduction will be introduced in respect of certain construction costs incurred on both new apartment development and conversion of non-residential property into apartments. This, combined with improvements in what qualifies for relief under the Living City Initiative and extensions to the Residential Developments stamp duty refund scheme, makes this the most comprehensive suite of housing measures we have seen in many years.

The Vat cut for hospitality and hairdressing to 9% will be welcome but does not commence until 1 July 2026. Given the increases to the minimum wage and other costs facing employers, such as auto-enrolment, it is unlikely that any benefit will be passed on to the consumer by way of price reductions. It is, in effect, a subsidy for the many SMEs in those sectors.

The increase in the Research and Development tax credit to 35% is welcome. Furthermore, the first-year R&D payment threshold is to be increased from €75,000 to €87,500 which will support more SMEs. Minister Donohoe also announced that he will be publishing a R&D compass in the coming weeks, which will consider targeted changes to the R&D tax credit to better align with industry practices, for example, in the areas of outsourcing and qualifying expenditure definitions and it will also develop a pathway for further innovation development supports.

Entrepreneur relief provides for a 10% reduced rate of capital gains tax on the first €1m of gains. From 1 January 2026, this 10% rate will apply to the first €1.5m of gains. While this change is modest, it is welcome and recognises the important role of our entrepreneurs in building businesses and driving our economic development.

The Key Employee Engagement Programme (“KEEP”) regime, which was due to expire at the end of 2025 and which is seen as essential to supporting smaller businesses by incentivising key employees, is to be extended until the end of 2028.

There has been an extension to the Accelerated Capital Allowances schemes for energy-efficient equipment until 31 December 2030.

As flagged, with no changes to income tax bands, Budget 2026 makes minimal changes to personal tax for employees. Many employees will experience income tax increases in the coming year as wages rise. This was a budget for business, not for employees.

To stay competitive, Ireland needs bold reforms that simplify tax and make it easier to do business. While badly needed and broadly cost-neutral for Government, these were largely absent from Budget 2026. The administrative burden of compliance has increased significantly in the last decade and change is now urgently needed. For example, on the R&D tax credit, 25% of large companies claim the credit but only 3% of small companies do. This is due to the cost and complexity of making a claim. It must be simplified to make it more impactful for a broader range of Irish owned businesses.

With limited resources available, this was a pro-business budget focused on housing and jobs. It is important, however, that Government continue to listen to stakeholders and bring that much-needed focus on simplifying the burden of doing business in Ireland.

Nicola Quinn is a Tax Partner with PwC