Budget 2026: Major Tax Hikes and Cuts Just Announced at Midnight

UPDATE: Midnight marked significant shifts in Ireland’s economic landscape as Finance Minister Paschal Donohoe unveiled the 2026 Budget, introducing new tax increases and crucial cuts. The total government spending will surge by €9.4 billion, yet the majority of this will not benefit the average citizen directly.

Effective immediately, the carbon tax on petrol and diesel has escalated from €63.50 to €71 per tonne of CO2 emitted. This increase translates to an additional 2-3 cents per litre at the pump, which will further impact home heating oil prices starting 1 May 2026. This annual rise, established under legislation from 2020, aims to incentivize the shift to cleaner fuels while generating revenue for climate initiatives and addressing fuel poverty.

Industry group Fuels for Ireland warns that motorists will likely face an additional 2.5 cents per litre due to further changes in renewable biofuel blending regulations.

In another development, the price of a standard packet of cigarettes has risen by 50 cents to €18.55. This standard hike follows last year’s significant increase of €1. A new tax on vape liquids will also take effect on 1 November 2023, imposing a flat rate of 50 cents per millilitre.

Additionally, a crucial VAT cut from 13.5% to 9% on new apartment sales commenced at midnight, set to last until 31 December 2030. Minister Donohoe stated this reduction is vital for addressing the “viability gap” in apartment construction, aiming to boost higher-density living spaces. However, Labour’s housing spokesperson Conor Sheehan criticized this move, noting it could cost the government €390 million annually without stipulations for developers.

Several existing schemes have been extended, including a 9% VAT rate on gas and electricity bills, now effective until 31 December 2030. The reduced Universal Social Charge for medical card holders will also continue until 31 December 2027.

The government has extended the €5,000 vehicle registration tax (VRT) relief for electric vehicles through 31 December 2026. Furthermore, the Rent Tax Credit will remain available until 2028, maintaining its benefits at 20% of rent payments, capped at €1,000 for individuals and €2,000 for couples.

Looking ahead, the Fuel Allowance season will be boosted by €5 per week to €38, while a range of social welfare payments will increase by €10 from January 2026. The national minimum wage will also rise by 65 cents to €14.15 per hour, reflecting adjustments in the Universal Social Charge band.

As these changes unfold, the financial impact on citizens is significant, with many bracing for increased living costs amidst a backdrop of rising inflation. The government is poised to face scrutiny over these adjustments, particularly regarding the balance between revenue generation and social support.

Stay tuned for further updates on how these measures will affect you and your community. Share your thoughts on these changes and their potential impact!