No income tax package; welfare changes: What can we expect from Budget 2026?

Finance minister Paschal Donohoe and public expenditure minister Jack Chambers will announce Budget 2026 on Tuesday. Picture: Brian Lawless/PA Wire

Next Tuesday, finance minister Paschal Donohoe and public expenditure minister Jack Chambers stand up in the Dáil to announce Budget 2026.

As budgets go, there have been a lot less kites flown and leaks compared to previous years. 

Ministers have complained of purse strings being held very tightly in the first budget of the new Coalition.

But what exactly can we expect?

Tax changes

One thing that Budget 2026 will not contain is an income tax package, as confirmed by finance minister Paschal Donohoe on Friday.

Mr Donohoe said the tax package will be focused on enhancing "the competitiveness of our country and support further investment".

"The consequence of that is there will not be changes from a personal taxation within the budget," Mr Donohoe said.

He added he would be prioritising on increasing jobs and investment in the future of the economy.

A cut to the Vat rate for hospitality is all but certain, with the only sticking point being when it will come into effect. 

A Vat rate cut is also planned for new-build apartments, as part of an attempt to boost supply.

Expansion of the Research and Development tax credit is also on the cards, to allow more small and medium enterprises access the rebate.

Social welfare

Social protection minister Dara Calleary has been pushing hard in recent weeks for a €12 hike in core welfare rates, like the State pension and Jobseeker’s Allowance. 

There has been some resistance from Mr Chambers and, like every year, the welfare budget will likely be the last agreed.

It is expected that there will be the traditional Christmas bonus payments for the State pension and Jobseekers.

Changes to the means test thresholds for the Carer’s Allowance are also nailed on, but it will not be abolished outright.

Childcare

Children’s minister Norma Foley is expected to begin the process of reducing childcare fees, with an overall aspiration of cutting them to €200 per month by the end of the Coalition.

Transport

While there had been some floating of possible fare hikes, transport minister Darragh O’Brien is said to be pressing to maintain the current lower fare rates, as well as the 90-minute fare and half-off youth cards.

Miscellaneous

We’re likely to see the usual excise increase on a 20-pack of cigarettes. 

One to watch will be whether the Government opts to increase the tax on e-liquids, which is not set to come into effect until November 1.