Budget 2026 Highlights for PAYE workers.
- No change in the standard rate of income tax cut off point for the 40% tax band, the entry point will remain at €44,000.
- The Rent Tax Credit will be extended to 2028 remaining at €1,000 for single taxpayers and €2,000 for married couples.
- Changes made again to the upper rate of the second USC band to €28,700.
- The Mortgage Interest Tax Credit will be extended due to 2025 and 2026 with a reduced rate in 2026. This is based on increased interest paid on mortgages between 2022-2026.
Income Tax
The finance minister has announced no change to the income tax band rates; therefore, the standard rate income tax cut-off point will stay at €44,000 for 2026.
Universal social charge (USC)
From January, USC will be calculated as:
- Income up to €12,012 will pay USC at a 0.5% rate.
- Income from €12,013 – €28,700 will pay USC at 2%.
- Income from €28,700– €70,044 will pay USC at 3%.
- Income over €70,045 will be taxed for USC at a rate of 8%.
USC is a tax payable on your gross income. Depending on your circumstances, you pay USC at the standard rate or the reduced rate.
Reduced rate for those who hold a Medical Card with earnings up to €60,000 will be extended to 2027, this was due to end at the end of 2025.
Claire Murphy, Chartered Tax Advisor, Irish Tax Rebates advises that: “This will benefit those in between the €27,000 to €70,044 USC brackets by €26 for 2026; at least there was a small bit of relief on people’s wages, but we thought there would be a few more benefits for PAYE workers”
Rent Tax Credit
The Rent Tax Credit which was meant to cease by the end of 2025 has now been extended until 2028 the credit will remain at €1,000 for 2026 for a Single Person and €2,000 for a Jointly Assessed couple.
“This is good news for those renting, and for married couples, meaning it will be worth €2,000 for 2026-2028. We also strongly encourage those who have children in 3rd Level courses and are paying for their accommodation to claim this credit – rent a room and digs type arrangements are also recognised tenancies for those students.” – Gerry Scully, Tax Accountant with Irish Tax Rebates.
Mortgage Interest Tax Credit
The Mortgage Interest Tax Credit will be extended to 2025 and 2026 with a reduced rate in 2026. This is based on increased interest paid on mortgages between 2022-2026.
Claire advises that – “Reports that this credit has benefited approximately 60,000 people out of a reported 180,000 homeowners who were eligible, I believe there will still be a smaller uptake on claiming this credit as in previous years. We are hoping that more will claim this as the credit can be worth up to €1,250 and if Mortgage Holders have not yet claimed this for the 2023 and 2024 tax year they could get up to €2500 back in tax.”
Additional budget updates:
- Tuition fees were reduced last year by €1000, instead of increasing it back by the €1000, it’ll only go back up by €500 to €2,500.
- Minimum wage has been increased by €0.65 to €14.15 per hour.
- Changes in VAT rates in hospitality and hairdressing from 13.5% to 9%.
- Social Welfare increases, notably an extra €10 for those in receipt of the core weekly payments such as State Pension, Single Parent payment etc.
Find Out What Tax Credits You Can Claim Today
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