Key Tax Changes from the 2026 Budget
The 2026 Budget introduced several important measures for business owners, employers, and innovative companies. While the Finance Bill will confirm the full detail, three key tax changes stand out that could impact entrepreneurs, employers, and R&D-focused businesses.
Entrepreneur Relief Gets a Welcome Boost
In a positive development, the Government announced an increase to the Revised Entrepreneur Relief under Section 597AA TCA 1997. This relief allows qualifying business owners to pay a reduced Capital Gains Tax rate of just 10% on the sale of a business or shares, instead of the higher standard rate.
Currently, the relief applies to gains of up to €1 million over a person’s lifetime. From 1 January 2026, this limit will increase to €1.5 million. This enhancement recognises the contribution of entrepreneurs and demonstrates continued Government support for those taking business risks.
One detail to watch for in the Finance Bill is whether individuals who have already used their €1 million limit will gain access to the additional €500,000 from 2026. This clarification could have a meaningful impact on many business owners.
If you are planning to sell your business or shares and your gain is likely to exceed €1 million, it may be worth considering whether a sale after 1 January 2026 would be more beneficial. The potential tax savings could be substantial — though commercial factors should always come first.
Electric Vehicle Benefits Extended
The Budget also extends favourable tax treatment for electric company cars. The €10,000 reduction applied to the original market value of electric and low-emission vehicles (categories A–D) will now continue until 31 December 2026. After that, it will be gradually phased out in 2027 and 2028 before ending completely in 2029.
From January 2026, a new category, A1, will be introduced specifically for zero-emission vehicles. This category will benefit from lower Benefit-in-Kind (BIK) rates — ranging from 6% to 15%, depending on how much the vehicle is used for business purposes.
For employers and employees, this means reduced tax exposure on electric vehicles for another two years. It will be important to review the updated BIK tables once published to ensure calculations reflect the correct categories and rates.
Research and Development Tax Credit Improvements
The Budget also includes significant improvements to the Research and Development (R&D) Tax Credit — a key support for innovation. Three headline changes will make the scheme more accessible and financially rewarding.
The credit rate increases from 30% to 35%, meaning companies will receive a higher return on qualifying R&D expenditure.
The first-year payment rises from €75,000 to €87,500, providing additional short-term cash flow support.
Simplified salary calculations mean that where an employee spends at least 95% of their time on R&D activities, 100% of their salary can now be treated as qualifying expenditure. This removes the need for detailed time tracking for staff who are fully focused on R&D.
Revenue has also published new guidance and videos to help companies navigate the claims process, acknowledging that the scheme has been complex in the past. These improvements should make it easier for innovative Irish businesses to benefit from this valuable relief.
What’s Next?
These changes highlight the Government’s continued focus on entrepreneurship, sustainability, and innovation. Once the Finance Bill is published, businesses should review how these measures apply to their own situation. The potential benefits are substantial, but taking full advantage will depend on understanding the finer details when they are confirmed.
If you would like to discuss how these changes could affect your business or how best to prepare for them please get in touch.