1 in 4 SMEs surveyed by Chartered Accountants Ireland in April reported that their business has lost employees or seen prospective employees unable to take a role due to the unavailability of affordable housing. This is evidence of the economic impact the housing crisis is now having according to the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I), the umbrella group for professional accountants, as it published its 2026 Pre-Budget submission today.   The OECD has noted that Ireland’s housing stock lacks the flexibility to meet the increasing demand for housing, and only last Tuesday, the Economic and Social Research Institute (ESRI) told the Oireachtas Committee on Housing that there will be no major uptick in housing supply in 2025 and 2026. CCAB-I notes this market failure, and calls for a targeted, time bound and regularly reviewed tax intervention to correct it.   Cróna Clohisey, Director of Members and Advocacy at Chartered Accountants Ireland said  “Viability of certain construction projects, namely apartments, student accommodation, and independent living facilities has been cast into sharp focus in recent months, with knock on impacts on the costs of rent, availability of student accommodation and the lack of options for downsizers. Recent data from the CSO shows that there was a drop of 24% in apartment completions from 2023 to 2024.   “October’s Budget should include tax measures to stimulate the development of such dwellings, but they need to be targeted, time-limited, and regularly reviewed to ensure that they are cost effective and do not repeat the mistakes of the past. We welcome the opportunity to discuss with government how tax might work as a lever in this regard.”    Regulatory burden  57% of SMEs surveyed by Chartered Accountants Ireland last month cited regulatory compliance as the area they most need help from the government in tackling (rising to 75% amongst small practices). In its Pre-Budget submission, CCAB-I identifies key areas where the intersection of tax law and administration are loading uncertainty and burden onto businesses, and calls for the following measures to be considered in Budget 2026:  Key proposed simplification measures   Simplify tax filing by introducing a single pay-and-file date for capital gains tax aligned with the annual income tax return.   Simplify the reporting of tax-free small benefits and expenses (the Enhanced Reporting Requirements rules) by replacing real-time reporting with monthly or quarterly returns. CCAB-I also recommends that penalties of €4,000 that are potentially chargeable where a reportable item is missed are made proportionate with the fact that the payments are non-taxable.   Introduce legislation enabling businesses to provide their staff with reasonable levels of hospitality while working without having to apply a benefit-in-kind tax charge. This would provide much needed certainty to business as to what they can provide in terms of lunches and teas and coffees and would critically support the local economy and hospitality sector. As we operate within a self-assessment tax system, employers should be empowered to determine what is a reasonable accommodation.  Cróna Clohisey, Director of Members and Advocacy at Chartered Accountants Ireland said  “A single pay-and-file date for capital gains tax aligned with the annual income tax return would alleviate the administrative burden of what is a low-yielding tax. 2024 Exchequer receipts from CGT accounted for approximately €1.7 billion, only 1.6% of the total tax receipts in that year.   “There is similar scope to ease administrative burdens for SMEs when it comes to the reporting of tax-free small benefits and travel expenses. The requirement to report these benefits “on or before” the time they are made or paid is excessive and should be replaced by monthly or even quarterly reporting. For example, in order to reduce the number of returns and the administrative headache of this requirement, many businesses now only reimburse travel expenses to workers on the same day as payroll. This means workers can be out of pocket for longer.  “Our research also shows that the regulatory compliance burden is particularly acute for SMEs with fewer than 50 staff; 35% have sought advice on how to reduce this burden, and they are the least likely to be able to shoulder it.”  Measures to support SMEs   The Programme for Government 2025 committed to rigorously implement the SME test to scrutinise every new piece of legislation and regulation for its impact on SMEs and examine the regularity of SME reporting and filing requirements.  CCAB-I calls for consideration to be given to enhancing the R&D tax credit regime for SMEs which has played an important role in promoting innovation and job creation in Ireland. The existing regime is limiting for the SME sector due to the restrictions on relief available for third party costs, and the use of third parties to carry out research and development on behalf of the SME is an indispensable option for Ireland’s SMEs. The automatic qualification for the R&D tax credit for SMEs in receipt of RD&I funding from Enterprise Ireland would also benefit the sector and remove complexity and uncertainty in this area.   Businesses are facing substantially higher employment costs, so CCAB-I is also asking that Government commits to no further increases in the rate of Employers’ PRSI for the next four years. Incremental increases across all classes of PRSI are planned up to 2028. Consideration should also be given to reducing the rate of Employers’ PRSI on minimum wage workers by 1.5% to help with the initial costs of pension auto enrolment which will likely come in next year.   Clohisey concluded:  “According to research we conducted last month among SMEs, 3 in 4 (77%) said that business costs have increased in the past six months, with staff costs the biggest challenge. There is anecdotal evidence that increases in minimum wage are causing employers to reduce hours to offset the increased costs, so committing to no further increases in the rate of Employers’ PRSI for a set period of time would go some way in trying to stem increasing labour costs.”  ENDS  Pre-Budget Submission 2026: Addressing the ongoing housing shortage

In addition to the targeted VAT supports announced under the banner of cost of living and supporting climate action, the VAT registration thresholds will also increase for a second year in a row. The flat rate compensation for farmers who are not registered or required to register for VAT will also increase.  VAT registration thresholds   From 1 January 2025, the VAT registration thresholds will increase from €40,000 for services to €42,500, and from €80,000 to €85,000 for goods. The increases aim to ensure that small businesses remain below these thresholds and do not have to register. The full year cost of the increases is estimated to be €15 million.  Farmer’s flat rate compensation  The flat rate compensation for farmers will increase from 4.8 percent to 5.1 percent from 1 January 2025.  The flat-rate compensation scheme is a special scheme for farmers who are not registered, or required to register, for VAT. The scheme is designed to compensate flat-rate farmers for the VAT they incur on farming costs without having to register for VAT. 

A range of measures to further the transition to an ever “greener” economy were also announced which included the expected €7.50 increase to carbon tax, a reduced VAT rate for heat pumps, and a new benefit in kind exemption for electric vehicle charging facilities.   Carbon tax   The rate per tonne of carbon dioxide emitted for petrol and diesel will increase from €56.00 to €63.50 from 9 October as per the trajectory set out in the Finance Act 2020. This increase will be applied to all other fuels with effect from 1 May 2025.   Emissions based Vehicle Registration Tax (VRT) for Category B Vehicles   An emissions-based approach to VRT for category B commercial vehicles is being introduced. This proposal will introduce a lower 8 percent rate for category B vehicles with CO2 emission of less than 120 grams per kilometre with a view to incentivising uptake of these lower emissions vehicles.  The weight carriage ratio for electric commercial vehicles is also being changed to enable them to qualify for the VRT rate of €200.  VAT rate on the supply and installation of heat pumps  Following amendments in the VAT Directive it is possible to apply a reduced VAT rate on heat pumps meeting specific technical standards. A VAT reduction to 9 percent for heat pumps is proposed from 1 January 2025 to incentivise homeowners to install heat pumps.  Accelerated Capital Allowances: gas and hydrogen vehicles  The Accelerated Capital Allowances scheme for gas and hydrogen-powered vehicles and refuelling equipment provides a tax incentive for companies and unincorporated businesses who invest in such vehicles and equipment for the purposes of their trade. The relief will be extended for a further year, to 31 December 2025, to allow the Department of Transport time to review the climate policy objectives underlying the scheme and to determine its future trajectory.  Benefit In Kind (BIK) treatment of Battery Electric Vehicle home chargers  A BIK exemption is being provided in circumstances where an employer incurs an expense in connection with the provision of a facility for the electric charging of vehicles at the home of a director or employee.  Emission thresholds for vehicle capital allowances  The CO2 thresholds for claiming capital allowances on business cars are being adjusted downward in light of improved vehicle emissions standards.   From 1 January 2027, an expenditure of €24,000 will be allowable for cars with CO2 emissions of 0-120g/km. A reduced amount of €12,000 will be allowable for vehicles with CO2 emissions of 121-140g/km. There will be no allowable expenditure for vehicles with emissions >141g/km. 

The announcements featured a range of supports in recognition of the importance of agriculture and the agri-food sector in the economy.   Accelerated Capital Allowances: Farm Safety Equipment  Accelerated capital allowances for expenditure incurred by farmers on certain farm safety equipment, and adaptive equipment for farmers with disabilities are available at 50 percent per annum over two years for eligible equipment.   Under Budget 2025, this measure is being broadened to allow for relief in respect of expenditure by famers on certain Targeted Agriculture Modernisation Schemes (TAMS).   Stock Reliefs   Stock reliefs are given as a deduction from trading income and are available in respect of the computation of farming profits. Subject to meeting certain conditions, a person carrying on the trade of farming is entitled to a stock relief deduction for an accounting period in which there is an increase in the value of the trading stock of the farming trade over the accounting period.   The following three stock reliefs, which were due to expire on 31 December 2024, are now being extended for a further three years to 31 December 2027:   General Stock Relief,   Young Trained Farmer Stock Relief, and   Stock Relief for Registered Farm Partnerships. 

An additional €1.37 billion in funding for childcare provision and extended mortgage interest tax relief for a further year were the main features. The 9 percent rate of VAT on gas and electricity will continue until April 2025.  Childcare provision  This additional funding will support the continued implementation of the National Childcare Scheme (NCS) subsidy, the Early Childhood Care and Education (ECCE) programme as well providing additional allocations toward Core Funding to support employers in meeting further increases in minimum rates of pay for those working in the sector.   In addition, two double payments of Child Benefit will be made to all qualifying households before the end of the year.  Mortgage interest tax relief  Mortgage interest tax relief, which was introduced on a temporary basis in Budget 2024, is being extended by one further year. Qualifying homeowners will be eligible for the relief in respect of the increased interest paid on their mortgage in the calendar year 2024 over the calendar year 2022 at the standard rate of income tax (20 percent), capped at €1,250 per property.   There is no change to the qualifying criteria for the relief, including that qualifying homeowners must have an outstanding mortgage balance on their principal private residence of between € 80,000 and €500,000 on 31 December 2022.  9 percent VAT for gas and electricity  It is proposed to extend the 9 percent VAT rate from 1 November 2024 to 30 April 2025 to address cost of living pressures associated with the price of gas and electricity. 

The key changes announced in Budget 2025 are: Increases to tax credits and bands as well as a 1 percent reduction in the USC,  An increase in the rental tax credit to €1,000, including a retrospective increase to its level in 2024,  The first increases in the CAT group tax free thresholds since 2019,  Enhancements to some business and investor reliefs, including a change to the proposed €10 million cap on retirement relief for family transfers of businesses, The small gift exemption which allows an employer to reward employees has been enhanced to allow five non-cash gifts up to a value of €1,500 per year,  Revenue will conduct a range of targeted compliance management activities in 2025, and  Confirmation that the participation exemption for foreign sourced dividends will commence as expected from 1 January 2025.  The Institute has a webpage dedicated to Budget 2025 where you can find further information. 

Budget 2025 saw the announcement of a series of tax measures to benefit both prospective buyers in addition to renters, alongside the announcement of €1.25 billion in additional funding to accelerate the building of new homes by the Land Development Agency. Stamp duty rates were also increased for higher value residential properties and bulk purchases, effective from today.   Rent tax credit   The rent tax credit is being amended to increase the amount that can be claimed from €750 to €1,000 (or €2,000 in the case of a jointly assessed tax-payer unit). This increase will apply in respect of the 2025 year of assessment.  In addition, the Minister also announced in his speech that in recognition of the cost-of-living pressures facing many renters right now, the credit will also be increased in 2024 to €1,000 and €2,000 respectively.  Help To Buy scheme   The Help to Buy scheme is an income tax measure intended to assist first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home. The scheme will be extended for a further four years, from the end of 2025 to the end of 2029.  Vacant Homes Tax  The rate of the Vacant Homes Tax is being increased from five times to seven times a property’s existing base Local Property Tax liability. This increase will take effect from the next chargeable period, commencing 1 November 2024.  Stamp duty changes   A third rate of Stamp Duty on higher value residential properties is to apply where the value/acquisition price involved exceeds €1.5 million. A new rate of 6 percent will now apply to the element of the value above €1.5 million. This change has immediate effect with normal transitional arrangements applying to transactions in process.  The existing 1 percent rate on residential properties valued up to and including €1 million, and 2 percent on any value above €1 million but below €1.5 million will continue to apply.   In addition, the Stamp Duty rate applied where 10 or more houses are acquired in any 12-month period is being increased from 10 percent to 15 percent, again with effect from Budget night. Transitional arrangements will also apply.   Pre-letting expenses  A deduction (capped at €10,000 per premises) from rental income for certain pre-letting expenditure is already available. This relief will be extended for a further three years to 31 December 2027.  Residential Zoned Land Tax (RZLT)  The RZLT is a new tax on land both zoned for residential development, and which has the necessary services in place to develop housing. The tax is designed primarily as a behaviour changing measure and not to be a significant revenue raising measure. RZLT is an annual tax, to be calculated at 3 percent of the market value of the land in scope.   Provision was made in the Finance Act 2021 for the RZLT. Amendments to the RZLT legislation will feature in Finance Bill 2024 which will provide for a further opportunity for RZLT landowners to seek a change in zoning in 2025 to a zoning which reflects the economic activity they undertake on the land.   Legislation will also be introduced to allow for 12-month deferral of RZLT liability between the grant of planning and commencement of development, exemption during Judicial Review  Proceedings brought by a third party as well as technical amendments.   To ensure local authorities appropriately consider requests the Minister for Housing, Local Government and Heritage will issue guidelines to local authorities indicating that they should consider and accommodate rezoning requests where landowners seek to continue undertaking existing economic activity.   

The main measures announced were the now usual annual Budgetary increases in excise duty for tobacco products, and the expected announcement of a new duty on e-cigarettes and vaping.  The bank levy was also extended to 2025  Tobacco excise  Excise duty on tobacco products is being increased by €1, inclusive of VAT, on a pack of 20 cigarettes in the most popular price category, with pro rata increases being made on other tobacco products.   Normally such a change would take effect from midnight tonight however the Budget 2025 Financial Resolutions which would confirm this have not yet been published.  E-cigarettes  Budget 2024 set out the Government’s intention to introduce a domestic tax on e-cigarettes and vaping in this year’s Budget. The Budget confirmed today that excise duty on e-cigarettes is being introduced and will apply to all e-liquids at a rate of 50 cents per ml of e-liquid. According to the Minister for Finance’s speech, a typical disposable vape contains 2ml of e-liquid, and costs in the region of €8. This new tax will bring the price of such a product to €9.23 including VAT.   Stressing once again the operational and administrative challenges associated with this new tax, it will not commence until mid-2025 and therefore will be subject to a commencement order.  Small producers of cider and perry  The excise relief for independent small producers of cider and perry is being extended to cover what is known as other fermented beverages, which includes products such as mead and wines other than grape wine such as elderberry wine, strawberry wine etc., as well as to higher strength cider and perry.  Bank levy  A revised bank levy was introduced for 2024, and this is now being extended for one further year to apply in 2025. This applies to those banks that received financial assistance from the State during the banking crisis, (AIB, EBS, Bank of Ireland and PTSB). It is expected that estimate revenue of €200 million will be collected in 2025.  Compliance  Revenue will conduct a range of targeted compliance management activities in 2025. It is expected that additional Exchequer receipts will arise from increased taxpayer compliance in a range of economic areas. The yield form this is estimated to be €70 million. 

The Minister announced the first increases to the capital acquisitions tax (CAT) group thresholds since October 2019. In addition, a range of changes and enhancements are being made to retirement relief, the new angel investor capital gains tax (CGT) relief, and the reliefs for investments in corporate trades, whilst the active farmer test for CAT agricultural relief is being extended to the disponer.  CAT thresholds  Increases to the three group thresholds for gifts or inheritances will apply as follows:  Group A from €335,000 to €400,000,  Group B from €32,500 to €40,000, and  Group C from €16,250 to €20,000.  For CAT purposes, the relationship between the person giving a gift/inheritance (the disponer) and the person who receives it (the beneficiary) determines the maximum amount (the “group threshold”) below which CAT does not arise. The standard rate of CAT remains unchanged at 33% in respect of gifts and inheritances taken on or after 6 December 2012.   CAT agricultural relief (AR)  The six-year active farmer test for the purposes of CAT agricultural relief is extended to the disponer and requires the donor to meet the six-year active farmer test in order for the beneficiary to benefit from AR. This narrows the relief to benefit farmers and safeguard AR for the genuine active farmer and the next generation of farmers. No date has been given for this change.  CGT retirement relief  Finance Act 2023 increased the age parameters (the upper age limit was extended from aged 65 until 70 and the reduced relief available on disposals from age 66 onwards was increased to age 70). It also introduced a cap on retirement relief of €10 million on the relief available up to age 70 for disposals to a child which is expected to take effect from 1 January 2025.  Finance Act 2024 will retain the increased upper age limit and introduce a clawback period of 12 years for the relief available on disposals over €10 million, after which the CGT will be abated.   These changes aim to ensure that the intergenerational transfer of Irish family businesses continues to be supported by the tax system. According to the Budget publications, this is estimated to cost €15 million in a full year.  CGT angel investor relief  This relief was announced in Budget 2024 and is targeted at encouraging business angel investment in innovative start-ups by offering a reduced CGT rate of 16 percent/18 percent for individuals and partnerships. The relief is due to commence “shortly” according to the Budget publications. However, it is now proposed to increase the lifetime limit on gains, on which the reduced rate of Capital Gains Tax applies, from the €3 million originally announced in Budget 2024 to €10 million.  This new relief will be available to an individual who invests in an innovative start-up small and medium enterprise (SME) for a period of at least 3 years. The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €10,000 and constituting between 5 percent and 49 percent of the ordinary issued share capital of the company.  The scheme will include a certification process, which will be conducted by Enterprise Ireland to ensure the relief is targeted at innovative SMEs that can demonstrate financial viability and compliance with the requirements of the EU General Block Exemption Regulation.  Qualifying investors will be able to avail of an effective reduced rate of CGT of 16 percent (or 18 percent if through a partnership), on a gain up to twice the value of their initial investment.  There will now be an increased lifetime limit of €10 million on gains to which the reduced rate of CGT will apply.  Relief for investment in corporate trades  Following a tax expenditure review, the Employment Investment Incentive (EII), Start-Up Relief for Entrepreneurs (SURE) and the Start-Up Capital Incentive (SCI) are to be extended for a further two years to 31 December 2025.   The limit on the amount that an investor can claim relief on for EII investments will be increased from €500,000 to €1,000,000. And it is proposed to increase the relief available to a maximum of €140,000 per year (€980,000 over 7 years) for SURE investments.