Tánaiste announces Budget 2026 Tax Changes to come into effect on 1 January 2026
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From: Department of Finance
- Published on: 1 January 2026
- Last updated on: 1 January 2026
The Tánaiste and Minister for Finance, Simon Harris TD, has announced a series of tax measures, agreed as part of the Budget, that will take effect from today. Speaking today, the Tánaiste said:
“Budget 2026 was designed to boost our economic resilience and to support workers and growth in their income by investing in jobs and in their future.
Several of the tax changes announced in Budget 2026, which will support individuals, families and businesses, take effect from 1 January 2026.
To continue the Government’s policy of ensuring that full-time workers on the minimum wage will remain outside the charge to the top rates of USC, the ceiling of the 2 per cent USC rate band has increased to €28,700. This will also give a modest benefit to all workers whose income is above that amount. Additionally, the reduced rate of USC for medical card holders is extended for a further two years.
The Rent Tax Credit has proven to be a very meaningful support for renters. To continue the support, the credit is extended for a further three years.
The Mortgage Interest Tax Relief is a measure that has assisted mortgage holders who have experienced increased interest rates since 2022. The credit is extended for a further two years.
Regarding climate-related measures, to support the large-scale transition to electric vehicles (EVs) a new BIK category has been introduced for EVs, while VRT relief for EVs is also extended to 31 December 2026.
Meanwhile, to alleviate energy cost pressures for households, the extension of the 9% VAT rate on gas and electricity to 2030 has already taken effect.
All of these measures will have a positive impact on businesses, taxpayers and households.
This is the first of five Budget which this government will deliver. We are committed to delivering for our citizens in the years ahead and over the course of the next four Budgets as set out in the Programme for Government.”
Tax measures taking effect from 1 January 2026
USC
As of 1 January 2026, the national minimum wage will increase by €0.65 per hour to €14.15 per hour. In parallel, the ceiling for the 2 per cent USC rate band will increase by €1,318 to €28,700. This increase will ensure that full-time workers on the minimum wage will remain outside the top rates of USC, while also giving a modest benefit to all workers whose income is above that amount.
The USC concession that applies to those who have a full medical card and earn less than €60,000 per year is also extended so that the reduced rate of USC will continue to apply for a further two years until the end of 2027.
Rent Tax Credit
The extension of the Rent Tax Credit to the tax years 2026, 2027 and 2028 is effective from 1 January 2026. The credit is valued at €1,000 for a single person and €2,000 for a jointly assessed couple.
Mortgage Interest Tax Relief
Budget 2026 extends the Mortgage Interest Tax Relief, on a tapered basis, for two further years to 31 December 2026.
Available to claim from early 2026, the relief applies in respect of the increase in interest paid in the tax year 2025 over 2022, with a maximum tax credit of €1,250 per property available.
The relief will also 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.
Vehicle Benefit-in-Kind
From 1 January 2026 the tables used to calculate BIK liability on employer-provided cars incorporate a new category for vehicles with zero emissions. The new A1 category introduces reduced BIK rates for electric vehicles, with rates of 6 to 15%, depending on business mileage.
Vehicle Registration Tax (VRT)
The VRT relief for electric vehicles, which was due to end on the 31 December 2025, has been extended by one year to 31 December 2026.