“Minister Donohoe’s initial comments that the overall Tax package for Budget 2026 would reduce by €200m to €1.3bn, to ensure more supports are available to the most vulnerable, set the scene that from a tax perspective this was far from a giveaway budget. There was however a bit in this Budget from a business perspective to make things interesting.”
Dave O’Brien, Head of Tax, Xeinadin
The government will be judged on Budget 2026 based on the number of new residential units built – the focus in this budget was definitely housing, and rightly so. The jury is out as to whether they have done enough though I would be sceptical but that’s not to say they haven’t tried to bridge the viability gap for developers when it comes to building new apartments.
The VAT rate reduction from 13.5% to 9% is on the sale of new apartments is definitely welcome, although to note it is 0% in the UK. Property buyers will not see this in a price reduction, as the decrease is to help make the building of apartments more profitable. On a €400k apartment, the saving would be €18k. An additional CT deduction for the building of apartments is also worthwhile – looks like a saving of up to €6,250 per apartment in taxation for that particular policy. So all in all a €24k reduction in the cost of building an apartment. Certainly not immaterial but the government had previously suggested the viability gap was closer to €144k per apartment so they are still some way off that.
The Living City Initiative has thankfully removed the condition that the building must have been built pre 1915 – that’s now 1975. This will help with people using the relief. Interestingly enterprises will now qualify for a €300k tax credit as opposed to €200k. Not entirely sure what enterprises means – does it mean businesses? Does this mean developers could now qualify? We may need to wait until the Finance Act to determine whether these changes will be worthwhile. Also extending the relief to an additional 5 towns in Ireland is good progress – let’s push to have this available to all towns in Ireland.
A new exemption for Corporate Tax on Cost/Rental Housing Scheme profits is definitely one to keep an eye on in the Finance Act. No corporation tax (or I presume the close company surcharge) will apply to income from housing that qualifies as cost/rental. These are long term tenancies and usually ran by governmental housing bodies. Will this positive change make the scheme viable to private owners? It might do once they can get over the funding issues for these projects.
A new Derelict Property tax is to be established which will be run by the Revenue Commissioners. Which at least means it will work properly – looks like it will run much like the Residential Zoned Land tax.
There are many other small amendments and a variety of extensions, most of which are detailed in our full Budget Summary. I hope you find it a useful overview of Budget 2026. There was little or no changes to personal taxation but there are some positives here – it’s the first attempt in years that the government is meaningfully using taxation to solve the housing crisis – hopefully they have done enough, but time will tell.
