Budget 2027: 10 things we know are coming
- An increase in the level at which the 40 per cent income tax rate kicks in plus changes to tax credits and the USC
- Modest increases in the three inheritance tax thresholds
- An increase in the renter’s tax credit
- Reduction of some €1,000 a year for parents of children in full-time care
- Main welfare rates and pensions will be increased by €10 a week
- Cuts in excise duty on fuel will be extended to cover the winter months
- Carbon tax relief on home heating oil and probably gas
- Fuel allowances, looks set to increase by €5 a week to €43
- Disability support payment will be announced, likely to be €500 a year
- Details of the new savings scheme, including annual limits and tax free threshold
- Read Cliff Taylor’s full report on what we expect to be announced on budget day
Budget 2027, to be presented on October 6th, is due to involve a package of €8.5 billion, with €7 billion in additional spending and €1.5 billion in tax reductions. The cost-of-living issue will be a key focus across the whole package.
Spending – the main issues
While the €7 billion figure is large, an increase of about 6 per cent on this year, much of this money is already effectively allocated to various budgets to keep pace with inflation.
There will, however, be key decisions to be made in areas such as health – which is already running well above budget for this year – and education and in what to allocate for a new public sector pay deal. And, of course, in welfare, one of the mainstays of any budget package.
Tax – the main issues
The €1.5 billion package leaves limited enough room for manoeuvre.
RM Block
If the bulk of the money were directed to income tax cuts it would allow the system to be adjusted for inflation and higher wages but not much more than that.
Minister for Finance Simon Harris has suggested that some money could be raised in tax increases to help pay for bigger reductions – a packet of cigarettes is set to move to €20, though extra tax revenue here will be limited. The bank levy, raising €200 million, is expected to be renewed for another year.
But Ministers will also have to find money to make some adjustment on inheritance tax and on some new business measures. And to pay the full year cost of the 9 per cent VAT rate for hospitality, announced last year.
Social protection
How much will be allocated to social protection – or welfare – will be a key issue. After some coming and going a general increase of €10 a week has been decided on, the same as the last budget.
The main welfare rates and pensions will be increased by this amount, though the main child benefit rate may stay where it is.
Promises to address child poverty are likely to see additional payments for people on welfare with children – known as child support payments – and possibly also expansions of the Working Family Payment, which is paid to lower-income families on lower earnings.
The much-discussed second tier of child benefit payments which would be paid to all lower income families is not, however, expected to happen this year.
Eligibility for the carers’ allowance is due to be extended, allowing people who have somewhat higher incomes to qualify.
Energy package
All things energy are hugely politically sensitive and will be central to the package. There will be three key elements – the carbon tax, excise taxes and cash supports to households.
A key focus will be additional supports for those struggling with energy bills through channels such as the fuel allowance scheme or household benefits packages, which help lower-income families meet daily bills.
So far the Government has resisted the return of energy credits – once-off cash payments to households to lower bills – saying it favoured more targeted, permanent measures. However, with energy prices remaining high, they have not been completely ruled out yet.
A big issue will be excise taxes on fuel. These were reduced in two steps earlier this year and the first step to the return of normal rates had been due to take place in November. Harris indicated in the Dáil on September 24th that the Coalition will push the date when this will happen through the winter.
A Government taskforce has been looking at the area of permanent supports to help households deal with energy costs. As part of this, the budget is likely to have something to say on supports for encouraging retrofitting in older homes and there will also be a scrappage scheme for old boilers, which has already been announced. Grants of €600 are also coming for those installing storage batteries as part of a solar panels investment. This is in addition to grants of up to €1,800 already available for solar PV installations.
The fuel allowances, paid to 470,000 households during the colder months, looks set to increase by €5 a week to €43. A lump sum payment to those who receive this payment had also been considered. It is not clear if this will happen in addition to the general €5 increase.
Annual carbon tax increases had been due to be given the go-ahead, as part of a planned series of increases up to 2030. But a big shake-up here is likely.
The Coalition has indicated that there will be measures to actually reduce the price of home heating oil. One possible route would be to reduce the existing rate of carbon tax on the fuel. The Coalition could also rule out further carbon tax increases on home heating oil and gas for the rest of its term.
Delaying planned carbon tax increases or reducing existing ones raises questions for spending, as revenue from this tax pays for areas such as SSIA grants for retrofitting – which the Government is trying to speed up – certain fuel-related welfare supports and some climate friendly programmes for farmers..
Disability supports
The Programme for Government commits to a permanent cost-of-disability payment to reflect the higher costs disabled people face in their daily lives. Minister for Social Protection Dara Calleary had a public consultation on it earlier this year.
A move looks on the cards in the budget, but it appears likely that it will be less than campaigners are looking for. Social Justice Ireland has said a €20-a-week payment would cost €242 million in a year.
A new disability support payment will be announced, but on a lesser scale, involving one or two lump sum payments a year. It looks likely to be €500 a year.
Income tax
An increase in the level at which the higher 40 per cent income tax rate kicks in looks certain. The current rate is €44,000 for a single person and €53,000 for a married couple.
An increase of €2,000 would be slightly ahead of inflation. It would be worth €400 a year to someone who earns enough to get the full benefit.
Harris may also indicate that the Government intends to increase the level at which the higher tax rate applies in successive budgets for the rest of its term.
For this budget, as many lower earners would gain nothing from an increase in the level at which the higher rate kicks in, there are also likely to be increases in tax credits and Universal Social Charge (USC) changes too. These would benefit all income tax payers, but give the highest proportional gain to the lower earners.
The budget will confirm the Government’s decision on an increase in the minimum wage. The Low Pay Commission recommended increasing it by 79 cent per hour, bringing the adult rate from €14.15 to €14.94 per hour from next January and it appears this will be accepted.
There will be a tweak in the entry level for the 3 per cent USC rate to make sure no one on the new minimum wage pays at this level.
[ Income tax change is coming in Budget 2027. Here’s what it means for youOpens in new window ]
Tax and Housing
There looks set to be an increase in the rent tax credit, which is worth up to €1,000 per year to a single renter and €2,000 to a couple.
With interest rates on the up, there will be a focus on whether the mortgage tax credit will be renewed. This year it was worth 50 per cent of the increase in mortgage interest paid in 2026 versus 2022, capped at a maximum tax credit of €625.
Martin has hinted that there might also be an improvement in the rent-a-room tax allowances, which allows homeowners to earn up to €14,000 a year from renting out a room to a long-term renter (staying for at least 28 days). The suggestion is that this might rise by €2,000 - a higher increase had been mooted earlier. There may be conditions attached.
There has also been discussion of other tax options – a cut in stamp duty for first-time buyers or an increase in the maximum tax repayment of €30,000 in the Help-to-Buy scheme. Harris appears to have ruled out these moves.
Inheritance tax
There have been hints from all sides of Government that there would be some move here. Pre-budget documents drawn up by civil servants warned of the high cost of fundamental reform of the tax, such as aligning the tax relief for wider groups inheriting to the levels which currently apply to children.
So it appears there will be modest increases in the three thresholds. The Category A threshold of €400,000 is paid by children inheriting from parents. The Category B threshold of €40,000 applies – generally – to siblings, nieces, nephews, grandchildren and grandparents who get inheritances. The Category C threshold of €20,000, applies in most other cases.
Capital Gains Tax
Senior Ministers have also referred to the possibility of capital gains tax moves, and Harris has said that the 33 per cent rate is “objectively too high”. It may not be a target for this budget, with resources focusing on income tax.
There could be an extension of some CGT reliefs, such as those available to entrepreneurs and a commitment to look at the whole capital tax system, particularly as it relates to investment. The rate of the so-called deemed disposal tax, which put a charge on profits from investments in exchange traded funds every eight years, looks set to be cut from 38 per cent to 35 per cent.
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Savings Scheme
The Minister for Finance is due to announce key details of his savings scheme. The outline shape has already been revealed – it will offer tax-free investment options for households in stocks and shares subject to certain limits. The key question is what these will be. The budget is due to reveal three key things.
The first is a limit capping what individuals can put in each year. The second is the total level of a savings fund that will remain free of all taxes. The third is the level of a new special tax rate that will apply to the assets in the fund above this limit – which may be 1 per cent, according to reports.
Childcare
As part of its cost-of-living package, the Government has promised further help for parents. Its programme promises to cap monthly costs at €200 per child, with progress made over the term of the Coalition. Higher investment to providers under the so-called core funding scheme was already announced to apply from September2026, together with weekly fee caps for parents.
This budget is set to announce a headline reduction of some €1,000 a year for parents of children in full-time care ( 45 hours a week) up to senior infants age. This will be achieved through an increased subsidy under the National Childcare Scheme - paid to providers and deducted from bills - and a cut in the cap on fees. Exact details are due to be finalised on Monday. Earlier reports had suggested this could come into effect in January, though the suggestion now is next September. There will also be measures to support the earnings of people working in the sector.
Harris has also hinted at increased tax relief for those minding a child or children in their home. At the moment a minder can earn up to €15,000 tax free per year for minding a maximum of three children – not counting their own.
Third level
A proposal to cut student fees by €250 a year was reportedly under discussion in late negotiations, but now looks unlikely. However some relief appears to be on the cards for families who have more than one child in college through an extension of current discounts which apply to some families.
Culture Giveaway
A plan had emerged to give a €100 voucher 16 year-olds in the Budget to be used for attending arts, music or culture events. A proposal to give such a voucher to 16 and 17 year-olds was part of the Programme for Government. It had appeared that this was going to be subject to further study, but the latest reports say the card will feature in some form in the budget speech.
Business
The Government has made general promises on supporting businesses, but what could happen remains unclear. An extension of research and development relief could be one potential avenue, as well as measures aimed at encouraging investment in domestic industry.
Businesses are also looking for higher spending on training, funded by a surplus in the National Training Fund, but it is not clear is this will happen. It appears now that this is on the cards, with an allocation from the fund for training in AI related areas. A sum of €150 million may be involved.
