Here’s everything you need to know about Budget 2026

This year the Government said the focus of the Budget was on protecting the economy and jobs, and promoting investment 

And with a Budget package of close to €10 billion, it was a sizeable sum of money. 

Yet with the carbon tax going up, tax bands not being increased to take account of inflation, no energy credits being paid, coupled with the recent hike in PRSI, it didn't feel like a Budget for workers, especially those on middle incomes. And many workers will be slightly worse off next year, especially if inflation begins to creep back up.  

As in previous years, many of the announcements had been leaked well in advance meaning Jack and Paschal could probably have saved themselves a trip to the Dáil!

But in case you missed it, here's a look at the main measures and what it all means for your pocket.

Income Tax and USC

Income tax bands and tax credits will remain unchanged and won't be increased even to take account of inflation. 

As a result, many workers who get small pay increases next year will see themselves being dragged into paying a higher rate of tax. This is what's called "fiscal drag". 

As per last year, a single person will start paying the top 40% rate of tax on any earnings over €44,000, which is low by even European standards. In the UK for example, the 40% rate only kicks in on earnings over £50,270, or almost €59,000. 

PRSI rates will remain the same. But all PRSI rates were increased by 0.10% for the second year in a row this month.

However the 2% USC band will increase from €27,382 to €28,700 to ensure that anyone who earns the new minimum wage of €14.15 an hour will not be dragged into paying the higher 3% USC rate. This will save those earning over €28,700 just over €13 a year. However, this "saving" will be negated by the recent hike in PRSI.

Energy 

As had been well flagged, no further energy credits will be paid this year. This is despite energy prices remaining high and a raft of suppliers increasing their electricity prices over the past few weeks.

Last winter, a €250 energy credit was paid to all households in two €125 instalments and the winter before a total of €450 was paid. So the lack of any credits will be a big adjustment for some households.

In better news, the reduced 9% rate of VAT on gas and electricity bills has been extended until 31st December 2030. 

Last year, those in receipt of the Fuel Allowance got a €300 lump sum payment. This year there will be no one-off payment but the rate of Fuel Allowance will be increased for the first time in several years by €5 to €38 a week. The payment will now also be extended to those who are getting the Working Family Payment.

See here for more information on the allowance and how to apply for it.

And if you have solar panels, and are getting money for selling excess electricity back into the grid, you can continue to earn €400 tax-free until the end of 2028 at least.

The Carbon Tax

The Government has already committed to increasing the carbon tax to €100 per tonne by 2030 so another increase in the tax was almost a foregone conclusion.

Carbon tax will increase by a further €7.50 to €71 per tonne of CO2 from 8th October.

This will increase the price of a litre of petrol and diesel by around 3 cent. However the increase on home heating fuels like gas won't kick in until 1st May 2026.

So what exactly does that mean for your pocket?

Below is an approximate outline of what the tax increase will add to various fuels, as well as the total amount now being paid in carbon tax.

*Based on average annual consumption of 11,000 kWh of gas

**Based on 900-litre tank

Reduced rate of VAT on food

The rate of VAT on food in hospitality and catering will be cut from 13.5% to 9% from 1st July 2026 after a long-running campaign from the sector highlighting the rising cost of doing business.

However don't expect lower prices in your local café, restaurant or pub. The VAT cut is not for the benefit of consumers. It's to help restaurants achieve a more viable margin and to try to sustain jobs in the sector.

The reduced VAT rate will also apply to hairdressing. But it won't apply to the hotel or accommodation sector.

Reduced rate of VAT on apartments 

The rate of VAT on apartments will also be reduced from 13.5% to 9% until 31st December 2030 to try to stimulate activity in the sector and make the building of apartments more viable.

Social Welfare 

There will be no one-off lump sum payments.

However there will be an across-the-board increase in social welfare payments. The State Pension, Jobseekers’ Allowance and other welfare payments will increase by €10 a week from January.  

The "Christmas Bonus" will be paid to social welfare recipients in early December. 

There will be an increase in the Carer's Allowance income disregard to €1,000 a week for a single person and €2,000 a week for a couple. This means that this amount of a single carer's or a couple's combined income won't be considered when calculating their eligibility for their payment or the rate of the allowance. 

There will be no increase in the universal Child Benefit Payment or "Children's Allowance". However the rate of Child Support Payment will increase by €8 for children under 12 and by €16 for children over 12, bringing the weekly payment to €58 for children under 12 and €78 for those over 12.

If you're unsure of any welfare assistance that you might be entitled to, check in with your local welfare office over the coming days.

The "Old Reliables"

It wasn't a good Budget for smokers (is it ever?).

The excise on a packet of cigarettes is increasing by 50 cent, bringing the price of a pack of 20 cigarettes up to around €19.

A tax on vapes, announced in last year's Budget, will come into effect from November at a rate of 50 cent per millilitre. This will increase the price of a typical disposable vape from around €8 to €9.25.

The excise on petrol and diesel has remained unchanged again this year. However an increase in the carbon tax — as outlined above — means the price at the pump will still rise.    

The excise on alcohol has also remained unchanged though the introduction of minimum unit pricing on alcohol in 2022 has already seen the price of cheaper alcohol increase significantly in recent years.

Other measures 

Other major announcements were: 

• The rent tax credit is being extended for another three years. But the amount will remain unchanged. It's worth up to €1,000 a year for a single person and up to €2,000 a year for married couples and civil partners. 
• There will be a permanent €500 reduction in the Student Contribution Charge for third-level students to €2,500. However, this is down from a reduction of €1,000 last year, so it may still feel like an increase to some.
• The rate of tax on savings in investment funds will be reduced from 41% to 38%. 

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