The Government has a problem. It has showered families with money over the last few years in a series of once-off payments. Its commitment to stop them this year will, inevitably, be noticed in household budgets. Its response is that it will focus now on permanent measures. So what goodies can households expect in Budget 2026?
Are the once-off payments gone?
Yes. Probably. Senior Fine Gael ministers were clear on the subject this week. The Taoiseach has been, too. Yet backbenchers will be restless, particularly with Energia increasing prices this week and households still facing high costs in many areas. Wage increases should generally exceed inflation this year, but many households have still to catch up with their pre-Covid position. Still, the Government seems determined to avoid further energy credits, or double child benefit weeks, though the traditionally Christmas double payment to welfare holders will no doubt features. Households will feel this, as these once-offs were a significant part of the overall gains from the budget last October. The double child benefit weeks and energy credits in the last budget delivered €810 to a family with two children.
What about income tax?
Will there be an income tax package? Yes. Will taxpayers notice? Perhaps not much. Tax credits and bands are likely to be adjusted – the rate at which earners enter the higher 40 per cent tax rate should be hiked again – though this may not fully account for wage increases. There may be some USC relief as well. With a limited €1.4 billion tax package on offer, the Coalition is juggling what it can afford for households against how to meet its promise to reduce VAT on hospitality back to 9 per cent.
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And childcare?
To soften the blow of no once-off measures, the Government will want to give young families cash in other areas. Childcare is one of them and a programme is due to be published here before the budget. The Programme for Government promised an increase in core funding – paid to childcare providers but requiring a commitment to keep to 2022 fees. This was already increased for the 2025/2026 year. A new cap on fees has already been announced for State-funded facilities under this scheme to come into effect this month of €295 a week gross – the cost to parents is then reduced by subsidies, typically to below €200.
RM Block
Payment rates under the National Childcare Scheme may also rise, providing more cash back to parents on their fees. The Government programme promised to explore making available an extra hour in the Early Childhood Care and Education programme each day in the second year of preschool.
What can we potentially look forward to in Budget 2026?
With the budget just under a month away, what will ministers Paschal Donohoe and Jack Chambers deliver on October 7th?The one-off cost-of-living measures of recent budgets may be discontinued, but what will be in their place to help families feeling the pinch? Will there be tax cuts? And what can renters and those looking to buy a home expect?Cliff Taylor of The Irish Times joined host Ciarán Hancock in studio to discuss.Plus, the three main Irish banks this week launched Zippay, an instant payments feature that they hope will launch next year. But will it be enough to win the battle with Revolut for Irish people’s digital wallets, especially as Revolut already has 3m Irish customers.Irish digital banking expert and CEO at InclusionFS, Brian Carroll, has helped to launch neobanks in a number of countries and he joined Ciarán on the line to discuss the timing of the launch and whether the Irish banks can beat Revolut at their own game.Produced by John Casey with JJ Vernon.
Currently the allocation is three hours a day for five days a week for 38 weeks a year. The 15 hours provided each week under ECCE are free, but parents typically pay for extra hours. And so the provision of an extra hour free for one of the years would yield significant savings for many households.
The wider backdrop is a Government promise to reduce childcare costs to €200 a month by the end of its terms – a very ambitious and expensive target. If there is to be any chance to achieve this, significant moves are needed in next month’s budget in pulling the various levers to reduce costs to parents.
One issue is that the sector itself is unstable, with some providers pulling out of the core funding model saying the fee freeze is unviable, meaning higher charges for parents. There is also a wider shortage of available places in many parts of the country. In turn this may require significant capital investment from the State to provide facilities in areas where a lack of provision leads to particular shortages.
Tax and childcare
Are there other ways that the Government could help young families? One proposal is to look at the tax system. Trish McCarvill, head of tax at Taylor Wessing Ireland, says that “the introduction of a tax relief for childcare costs for all families would help to alleviate the financial pressure on parents and should improve participation in the workforce.”
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She says it would increase choices for parents, who are frequently forced to scramble to put in place childcare options given the cost and lack of availability of creche places.
The tax relief could work in a similar way to the relief people can claim for health expenses.
“The income tax charged to the parents could be reduced by 20 per cent of the childcare costs where the parent can vouch that he or she paid for them,” according to McCarvill. The relief would be restricted to the standard income tax rate on equity grounds andsubject to a reasonable maximum cap.
A tax relief for parents paying for childcare costs would have the added merit of helping to bring all childcare providers within the tax system, she points out – in line with national policy – and would thus help open up a variety of options for parents. A similar system in Canada “has helped increase maternal employment and bring many informal providers into the tax system,” she says
What about child benefit payments?
If there are no double child benefit weeks, will the core payment rate increase. This will be an interesting one to watch. The universal rate of €140 a month per child has remained unchanged for years, though parents have benefited from “ double week” in the last three budgets.
A key issue here is that the Government has committed to examine ways to help less well-off families. The ESRI has proposed a second rate of child benefit aimed at lower income families, likely to cost more than €750 million a year when fully introduced. The Department of Social Protection has warned of “complexities” and while ministers have publicly supported the idea, the most that might happen this year is a roadmap for its introduction over a period of years.
Last year the Child Support Payment, made to people receiving a social welfare payments rose by €4 per week to €50 for children under 12 and by €8 a week for children 12 and over. Depending on what is done on the second child benefit option – which would eventually replace the child support payment and other existing supports – this could be increased again this year as a measure to help less well-off families. The Working Family Payment could also be pushed up.
Money in parent’s pockets
With the once off payments being phased out, the Government will also be looking at other ways to put money back directly into the pockets of parents. Certainly, the lower VAT rate on energy will be renewed as abolishing this as energy credits end would be seen as too much. However, carbon tax increases will continue to add a little more to bills.
The Government has promised, over its terms, to remove means-testing for carers and so there will be another increase in the qualifying limit here, as well as a rise in the rate.
For those renting, the rent tax – now €2,000 for a couple – is likely to rise again, perhaps to €2,500.
Other promises in the Programme for Government are also likely to be progressed. Free GP care for children under the age of 8 is due to be extended to under-12s during the Government, so perhaps another year will be added. Free school book and hot meals schemes will continue to expand.
In third level, there will be close attention paid to the registration charge, set at €3,000 but reduced to €2,000 over the past three years. It is due to revert to €3,000 for this year, but the Government is likely to do something on this in the budget, given its promise to reduce the charge over its term. Again, a paper is promised on this in the weeks ahead. Will the Cabinet go for another temporary cut or something more permanent? Maintenance and Susi grants for lower income students may also increase. And it will be interesting to watch if a “second chance” promise for those who change third level courses after the first year is delivered, meaning they would not have to pay full fees for a year, as is currently the case.
And finally, what about the promise of a new Government supported savings account for newly born children?
