Budget 2027 Ireland: What It Means for Your Business, Payroll and Personal Tax

Budget 2027 was announced on Tuesday, 6 October 2026. It is a bigger budget for workers than last year, with the first income tax band increase since Budget 2025, and a handful of quieter changes that matter a lot for company owners: a lower Capital Gains Tax rate, a reworked preliminary tax regime, a more generous R&D tax credit and a further rise in the minimum wage.

Most of the headlines focused on take-home pay. For business owners, the more useful question is what you need to change in your payroll, your cash flow plan and your tax planning before January. This guide covers both, with practical next steps at the end.

Please note: this article is based on what was announced on Budget day. Most tax measures still have to pass through the Finance Bill, which can change detail and start dates. Treat this as general information, not advice for your specific situation.

Budget 2027 at a glance

• Overall package: €8.5 billion, of which about €1.65 billion is tax measures and the rest is additional spending.
• Income tax: a €1.3 billion package. The 20% rate band rises by €2,500 to €46,500 for a single person, and the main tax credits rise by €125.
• USC: the 2% band is extended by €1,600 to €30,300.
• Minimum wage: up 79 cent to €14.94 per hour from 1 January 2027.
• Capital Gains Tax: standard rate cut from 33% to 31% from 7 October 2026.
• Preliminary corporation tax: small company threshold raised from €200,000 to €350,000, plus a new, more flexible payment option.
• R&D tax credit: first-year cash payment threshold increased from €87,500 to €105,000.
• New Investment Account: launching July 2027, with up to €12,000 a year in contributions and no tax on the first €50,000.
• Energy: reduced fuel excise extended to 28 February 2027, and carbon tax on natural gas and kerosene cut to €48.50 per tonne.

Income tax and USC: what changes on your payslip

Budget 2026 left income tax bands and credits unchanged, so many people paid more tax in real terms this year as wages rose. Budget 2027 goes some way to correcting that.

For jointly assessed couples with two incomes, the €55,500 band can be increased by the lower of €37,500 or the lower earner’s income, giving a maximum combined 20% band of €93,000.

Home carers. The home carer tax credit rises by €100 to €2,050. It is available to married couples or civil partners who are jointly assessed, where one spouse cares for a child, an older person or a person with a disability in the home. The full credit applies where the home carer’s own income is €7,200 or less, with a reduced credit available up to €11,300.

USC rates for 2027: 0.5% on the first €12,012, 2% from €12,013 to €30,300, 3% from €30,301 to €70,044 and 8% above that. Self-employed income over €100,000 carries an additional 3% surcharge.

What someone earning €50,000 takes home in 2027

Here is a full worked example for a single PAYE employee on €50,000 a year, with the standard personal and employee tax credits only. PRSI reflects the rate increases on 1 October 2026 and 1 October 2027, which fall part way through each year.

So the income tax and USC changes are worth about €766 a year at this salary, but the PRSI increases take back around €75, leaving roughly €691 a year more in their pocket. Figures are rounded and are for illustration only. Actual take-home pay depends on each person’s credits, pension contributions and benefits.

These changes normally take effect from 1 January 2027 and flow through payroll automatically once Revenue issues updated tax credit certificates. Employees on emergency tax, or with out-of-date credits on their Revenue record, will not see the benefit until that is fixed.

For employers: payroll costs are still going up

The income tax cuts help your staff. They do not reduce what it costs you to employ them. Three things are worth planning for now.

1. The minimum wage rises to €14.94 per hour

The national minimum wage rises by €0.79, from €14.15 to €14.94 per hour. For a full-time employee on 39 hours a week, it adds roughly €1,600 a year in gross pay before employer PRSI. If you pay above minimum wage, expect pressure to keep the gap with staff just above you. Hospitality, retail and care businesses will feel this most. The new rate applies to hours worked on or after 1 January 2027.

2. PRSI went up on 1 October 2026

This was not a Budget 2027 measure, as it was legislated separately as part of the multi-year PRSI increases. From 1 October 2026, the main employee rate rose from 4.2% to 4.35% and the main employer rate rose from 11.25% to 11.4%. A further 0.15% increase is scheduled for 1 October 2027, and another 0.2% from 1 October 2028, so build both into your staff cost forecasts.

One small offset in Budget 2027: the weekly earnings threshold for the lower employer PRSI rate rises from €552 to €600 for 2027. This is designed so that full-time staff on the new minimum wage stay on the lower employer rate. If you have staff earning close to this threshold, check which side of it they fall on.

3. Company car BIK relief is tapering

Again, this was set in last year’s budget, but it bites in January. The temporary reduction to the Original Market Value used for company car and van BIK falls from €10,000 in 2026 to €5,000 in 2027, and €2,500 in 2028. Most employees with a company car will see a higher BIK charge on their payslip from January. It is worth telling them before they notice it.

Good news on Enhanced Reporting Requirements (ERR)

ERR are the rules that require employers to report tax-free payments such as small benefits, travel and subsistence and remote working allowances to Revenue on or before the date they are paid. From 1 January 2027, employers can choose to keep reporting in real time, or instead report these payments by the 14th of the following month.

This is a genuine time-saver for smaller employers, but it is not a reason to relax. You still need a reliable way to capture every reportable payment as it happens, so that the monthly return is complete and correct.

Running payroll for a growing team means each of these lands on someone’s desk in January. If that person is you, it may be time to look at outsourced payroll.

For companies: corporation tax and cash flow

Preliminary tax: more room for growing SMEs

This is the measure most likely to improve cash flow for our clients, and it received very little attention on Budget day.

• Small company threshold up from €200,000 to €350,000. Companies whose corporation tax liability for the previous year was below this threshold can generally base preliminary tax on 100% of the prior year’s liability, rather than estimating 90% of the current year. The old limit had not moved in around 15 years.
• A new 80% option. Companies will be able to meet their obligations by paying 80% of the current year’s liability by the final preliminary tax date, with the balance to reach 100% paid within four months of the year end.
• The 45% deeming rule is removed in specified circumstances. Under current rules, underpaying the second instalment could also make the first instalment count as underpaid. In the cases covered by the change, that provision is going.

For a profitable company in a growth year, getting preliminary tax wrong is one of the most common ways to end up paying interest to Revenue. These changes make it easier to get right, but you still need reasonably current management accounts to use them well.

R&D tax credit: easier access to cash

The R&D tax credit rate stays at 35%, following last year’s increase. What changes:

• The first-year cash payment threshold rises from €87,500 to €105,000, so more of the credit can be received in year one.
• The limits for R&D subcontracted to universities and unconnected third parties rise from 15% to 20% of qualifying spend, and the alternative cash limit doubles from €100,000 to €200,000.
• A new provision allows the qualifying cost base to be increased by 5% of qualifying R&D wage costs, subject to conditions.
• Regulated clinical trials can be treated as meeting the science test.
• The treatment of the credit in calculating preliminary corporation tax is being changed.

Combined with the 12.5% corporation tax deduction for the same spend, smaller companies can effectively get relief worth around 47.5% of qualifying R&D costs. If you build software, products or processes and have never looked at whether some of that work qualifies, it is worth a conversation.

Start-up reliefs extended

• Corporation tax relief for start-up companies is extended to 31 December 2030. It can apply for the first five years of trading and is linked to the amount of employer PRSI the company pays, so it rewards start-ups that create jobs.
• The Employment Investment Incentive (EII), Start-up Capital Incentive (SCI), Start-up Relief for Entrepreneurs (SURE) and Angel Investor Relief are extended, subject to the new EU General Block Exemption Regulation.
• The Knowledge Development Box is extended to 1 January 2032.

Professional Services Withholding Tax (PSWT) to be modernised

If you provide professional services to the State, semi-State bodies or the HSE, 20% is currently deducted from every payment and credited back against your tax later. That flat rate is to be replaced with personalised deduction rates, which should ease cash flow for consultants, contractors and professional firms who are over-deducted today. The change needs a commencement order, so no date is set yet.

Capital Gains Tax: the headline change for business owners

The cut matters most if you are planning to sell shares, a property or part of your business, or are thinking about succession. Timing and structure matter, so plan a sale well before it happens rather than after the heads of terms are signed.

Capital Acquisitions Tax: higher thresholds for gifts and inheritances

The tax-free thresholds for gifts and inheritances increase for benefits taken on or after 7 October 2026. The CAT rate stays at 33%.

The thresholds are lifetime limits, so earlier gifts and inheritances within the same group count towards them. If you are planning to pass on a business, property or other assets to family, these changes are worth factoring into your succession plan.

Investment changes

• Exit tax down to 35%. The rate on Irish funds, equivalent offshore funds and certain life assurance products falls from 38% to 35% from 1 January 2027. Deemed disposal itself remains under review.
• New Investment Account from July 2027. Irish-resident adults will be able to invest up to €12,000 a year in shares, bonds, funds and insurance-based investment products. Funds up to €50,000 are tax-free, and the average value above that is taxed at 1% a year, whether the account rises or falls. The provider calculates and pays the tax, so there is no tax return to file.

Hospitality businesses

The reduced 9% VAT rate for food-led hospitality and hairdressing took effect on 1 July 2026 under last year’s budget and remains in place. Budget 2027 adds:

• €15 million to support rural pubs.
• An extension of reduced fuel excise rates to 28 February 2027, followed by a phased restoration completed by 30 June 2027.
• A cut in carbon tax on natural gas and kerosene to €48.50 per tonne, with the Government saying it will stay at that rate for its lifetime. Check how this flows through to your own energy contracts.

Against that, the minimum wage increase will hit hospitality harder than most sectors. For many operators, the net effect of Budget 2027 is a higher wage bill with modest energy relief. If your margins are already tight, now is the time to rework your 2027 cost model, not in February.

Founders and international businesses setting up in Ireland

If you are forming a company in Ireland, or run an Irish company from abroad, the most relevant changes are:

• Startup Ireland. €3 million to Enterprise Ireland to set up a national entrepreneurship initiative and a single entry point for founders.
• Start-up company relief extended to the end of 2030.
• The higher preliminary tax threshold, which makes it simpler for young, profitable companies to manage their first corporation tax payments.
• A €1 billion investment programme aimed at building the next generation of large Irish companies.
• €150 million from the National Training Fund to improve Ireland’s AI readiness, which should mean more training and support for SMEs adopting AI.

The personal tax changes only apply to the extent you are taxable in Ireland. Non-resident directors drawing a salary from an Irish company still need the payroll, PRSI and tax residency position set up correctly from the start. Our guide Can a Non-Resident Set Up a Company in Ireland? covers the basics.

Other changes worth knowing

• Help to Buy: maximum increases from €30,000 to €35,000, with no change to the €500,000 property value limit.
• Rent-a-room relief: tax-free threshold rises from €14,000 to €16,000.
• Childcare services relief: income exemption for childminders rises from €15,000 to €20,000.
• Social welfare: €10 a week increase in core rates and the State pension.
• Derelict Property Tax: a new annual tax of 7% of the self-assessed market value of derelict property, collected by Revenue. The first preliminary registers are due on 1 September 2027, with the first payment and filing date on 23 June 2028.
• Digital games tax credit: extended to 31 December 2031.
• VRT: the €5,000 relief for electric vehicles is extended to 31 December 2028, while VRT on most petrol and diesel cars rises by one percentage point from 1 January 2027.
• Excise: €1 on a pack of 20 cigarettes and a new 20 cent per ml tax on vaping liquid.

What business groups made of it

Chambers Ireland welcomed the budget as constructive for workers and families, but said it does not address the full range of costs facing businesses. It wants the Government to act on the recommendations of the Cost of Business Advisory Group, and questioned whether the €150 million AI training allocation goes far enough to help SMEs adopt AI at scale.

For most SMEs, the tax changes are welcome but modest next to the pressure from wages, energy and admin time. Those costs are easier to manage when you have up-to-date numbers and efficient processes, rather than waiting to see what the next budget brings.

Key dates

Your Budget 2027 checklist

How OTHS can help

Budget announcements are only useful if they turn into decisions. We help business owners do that in practical ways:

• Payroll: we run payroll for Irish SMEs and multi-entity groups, and handle rate, credit and ERR changes so your January payroll is right first time.
• Tax and compliance: corporation tax, preliminary tax planning, VAT and Revenue support, so you pay what you owe and no more, on time.
• CFO and advisory support: 2027 forecasts, cash flow planning and margin reviews for businesses that want to see the impact of these changes before they hit. If you are not sure whether you need that level of support, read What Is a Fractional CFO and Do Irish Businesses Need One?
• Company formation: for founders setting up in Ireland, including non-resident directors.

Talk to our team

If you have questions about how Budget 2027 affects you or your business, please contact our team.

If you would like to talk through what Budget 2027 means for your business, book a free discovery call. It takes 15 minutes, and you will come away with a clear list of what to change and when. You can also reach us at [email protected] or +353 1 912 5422.