No boost to take-home pay as tax bands frozen in Budget 2026, says Donohoe
Workers will not see a change in their take-home pay.
Workers will not see a change in their take-home pay next year as finance minister Paschal Donohoe confirmed tax bands will remain unchanged in next Tuesday's budget.
He said the €1.5bn tax package will focus on protecting jobs and improving Ireland’s competitiveness, while warning a bigger package would risk Ireland’s economy.
Mr Donohoe said the cost of an income tax cut would be between €1.2bn and €1.3bn.
He added that the Government was seeking to make progress on multiple priorities, but this could not be done in a single budget.
“If I were to aim to make progress on all of these matters together, I would end up proposing a tax package that I believe would be too big for Ireland. I believe it would pose risks to us in the future,” Mr Donohoe said. “I don’t want to see that happen.”
According to the latest exchequer returns for September, the Government’s surplus of the year so far has fallen from the €5bn recorded during the same period in 2024.
When receipts from the Apple tax last September are excluded, an underlying exchequer deficit of €1.9bn was recorded — a deterioration of €6.9bn year-on-year.
It comes as Taoiseach Micheál Martin issued a warning to restaurants that the Government want any prospective Vat cut to be reflected in customers’ bills.
During an interview with the , he stressed that while no Vat cut has been signed off, the Government accepts that worker protection measures it has introduced have added to the cost of doing business.
“We would like to see anything we do, if something were to happen, that it should be reflected in the pricing,” the Taoiseach said.
He also vowed there will be support for those on lower incomes to help them with the cost of living and energy prices.
Meanwhile, public expenditure minister Jack Chambers reaffirmed there would be no one-off cost-of-living package included, but the Government would instead target measures within the social welfare system.
Mr Chambers declined to outline whether or not there would be a Christmas bonus for social welfare recipients, saying discussions were ongoing.
One Government source described talks on the social protection budget as being “at a critical stage”, adding “everything is on the table”.
Social protection minister Dara Calleary has been pushing for a €12 increase in core welfare rates, including the State pension and Jobseeker’s Allowance.
Other measures on the table include increasing the income disregard for the Carer’s Allowance, which one source says would be a higher increase than seen earlier this year.
In July, the disregard was increased by €175 for singles and €350 for couples.
There is also a push to increase the fuel allowance, while also expanding the access to households who receive the working family payment.
Negotiations are expected to go down to the wire across the board, as talks between the Taoiseach, Tánaiste, and two money ministers were interrupted on Friday, after a fire alarm went off in Government Buildings.
Several Government sources told the they did not expect their departments' budgets to be settled until Saturday or Sunday.
It is understood that just two or three departments have settled their packages, with one person stating that everyone is going "right to the wire".
"It just wasn't like this last year," one adviser said.
One exasperated Government source stated they would "have a better guess at the Lotto numbers than our budget".
Another source stated that they had been told by long-term officials that the negotiations have not been this bad since 2012.
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