There were little in the way of income tax measures announced today, however, the Minister for Finance announced a change in the USC bands to ensure that the increased minimum wage of €14.15 remains outside the higher rates of the USC. It is also important to note that all workers will be impacted by the increase of 0.1 percent employee PRSI from 1 October 2025 and another 0.15 percent is expected on 1 October 2026. Budget 2026 has also extended the rent tax credit and mortgage interest relief that were due to expire in 2025.
The Minister also announced that there is to be a reduction in the rates of taxation that apply to certain investments from 41 percent to 38 percent which includes Exchange Traded Funds (ETFs).
USC
To ensure that the salary of a full-time worker on the minimum wage will remain outside the 3 percent rate of USC when the minimum wage increases from €13.50 to €14.15 from 1 January 2026, the ceiling of the 2 percent USC rate band will increase by €1,318 from €27,382 to €28,700.
As a result, the USC rates and bands from 1 January 2026 will be:
Incomes of less than €13,000 remain exempt from USC.
The estimated cost of the changes in USC is €72 million in 2026 and €76 million per annum thereafter.
Medical card holders with income not exceeding €60,000 will continue to qualify for the reduced USC rate to 31 December 2027.
The rent tax credit, which was due to expire on 31 December 2025, has been extended for a further three years to 31 December 2028. The value of the tax credit for 2026 is a maximum of €1,000 per single individual and €2,000 per jointly assessed couple. The cost of retaining this credit to the Exchequer is estimated to be €350 million per annum.
Mortgage interest relief has been extended on a tapered basis to 31 December 2026. The current level of relief will be maintained for the increase in interest paid in the tax year 2025 over 2022, with a maximum tax credit of €1,250 per property available, this relief can be claimed by taxpayers from 2026. A reduced level of relief will be available for the increase in interest paid in the tax year 2026 over 2022, with a maximum tax credit of €625 per property applicable, this relief can be claimed by taxpayers from 2027.
The cost of extending the relief to 31 December 2026 and maintain the current level of relief for 2025 and reduce the level of relief applicable for 2026 is estimated to be €38 million.
The temporary universal relief of €10,000 applied to the Original Market Value of a vehicle (including vans) for vehicles in Category A-D and the amendment to the lower limit of the highest mileage band is being extended to 31 December 2026. This will taper to €5,000 in 2027, €2,500 in 2028 before it is abolished from 1 January 2029.
The tables used to calculate BIK liability on employer-provided cars are being amended to incorporate a new category for vehicles with zero emissions. The new A1 category introduces reduced BIK rates for electric vehicles, with rates of 6 percent to 15 percent, depending on business mileage.
Micro-generation of electricity
The income tax relief that exempts income up to €400 per annum from the micro-generation of electricity is extended to 31 December 2028. The cost of extending the relief is estimated to cost €10 million per annum.
The rates of taxation that apply to investments in Irish domiciled funds and life assurance policies, other than those applying to companies, personal portfolio investment undertakings and personal portfolio life assurance policies will be reduced, as will the rates that apply to equivalent offshore funds and certain foreign life assurance policies. The tax rate applicable to relevant investments is being reduced from 41 percent to 38 percent. The overall cost of the reduction is estimated to be €19 million.
The rate change will apply to Exchange Traded Funds (ETFs) including Irish domiciled ETFs.
The Finance Bill 2025 will provide for additional amendments to the tax treatment for the Auto Enrolment (AE) Retirement Savings Scheme to
Manufacture of Uilleann Pipes and Irish Harps
The Income Tax disregard on up to €20,000 of a person's profits from the manufacture, maintenance and repair of sets of uilleann pipes, early Irish harps and Irish lever harps, is being extended to 31 December 2028. The relief is expected to cost €500,000 per annum.
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