Minister for Finance Paschal Donohoe and Minister for Public Expenditure Jack Chambers will deliver the Government’s budget – its first since last year’s general election – on October 7th.
While last year’s budget was marked by pre-election expenditure, with a €2.2 billion cost-of-living package of once-off measures, this year is expected to be more restrained.
The Government has signalled since the start of the year that the once-off measures are being dropped in favour of targeted support for the most vulnerable households.
Growth in spending is expected to slow, and there will be a focus on delivering large-scale infrastructure projects.
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It comes against the backdrop of huge economic uncertainty brought about by the introduction of trade tariffs by US president Donald Trump, including 15 per cent on goods from the European Union, including Ireland.
Here’s what we know so far:
Headline figures
Budget 2026 is expected to contain an overall package of €9.4 billion.
Of this €7.9 billion will be available for spending measures and there is some €1.5 billion for tax cuts.
Taxation
The long-signalled intention to cut the VAT rate for the hospitality sector to 9 per cent is the elephant in the room when it comes to what other tax cuts can be included in the budget. The measure to help struggling restaurants and pubs has been a Fine Gael promise but it is expensive.
Even if, as mooted, hotels are excluded from the VAT rate cut, the full-year cost is more than €650 million, a sizeable chunk of the €1.5 billion earmarked for tax measures in the budget. Delaying the implementation of the VAT cut to later in 2026 reduces the overall bill; however, the measure will still significantly reduce the sums available for a personal tax package.
The Government has committed to preventing an increase in the burden of income tax. How it achieves this, whether through measures such as raising the entry point for the higher rate of income tax and cuts to the Universal Social Charge, is a significant question.
Welfare
Minister for Social Protection Dara Calleary is expected to seek an increase in core welfare payments that matches last year’s rise of €12 per week.
The one-off lump sum payments for welfare recipients are unlikely to be repeated. However, do not rule out the Christmas bonus double payment which has now recurred over several years after being reinstated in the years following the economic crash.
There have been proposals for a second-tier child benefit for families in particular need, but Mr Calleary said earlier this month that such a scheme will not be introduced this year. He said the necessary work to bring it about will not be completed in time and indicated it could be ready for next year’s budget.
Mr Calleary is also expected to push for an increase in the child-support payment that would at least match last year’s increase. In 2025, the payment increased by €4 weekly for under-12s and €8 for over-12s.
He is also expected to seek increases to the income disregard for the carer’s allowance which at least match those given in last year’s budget.
Sources said the Department of Public Expenditure had emphasised the importance of “moderating expenditure” in early talks on welfare.
Cost of living
The Government has come under fire from the Opposition over the plan to drop the once-off electricity credits that have helped households with energy costs in recent years. Taoiseach Micheál Martin told the Dáil: “There will be supports in the budget for those most in need.” The most likely avenue for this is through the fuel allowance payment. Options include increasing the weekly payment, extending the payment period, or expanding eligibility.
One measure Mr Calleary is expected to seek is that the fuel allowance be paid to families in receipt of the Working Family Payment.
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Minister for the Environment Darragh O’Brien has privately urged Mr Donohoe to extend the reduced rate of VAT applied to energy bills in the budget.
The reduced rate is due to expire at the end of October. The extension is widely expected, with Mr O’Brien said to have emphasised its value to households.
Childcare
Parents paying the highest creche fees could be in line for a budget boost, under proposals being examined by Minister for Children Norma Foley. The Government introduced a cap on childcare fees earlier this year. This means no parents should pay more than €295 a week for a child attending a service participating in the Government’s Core Funding scheme for between 40 and 50 hours a week.
Ms Foley is understood to be examining measures which would focus on how to bring down fees for families paying the highest costs which would likely benefit parents around Dublin and other cities. It is also expected that the frozen-fees arrangement, which has fixed fees at 2021 levels, will be extended.
Third-level charges
In recent years, third-level students have had €1,000 cuts to the €3,000 student contribution fee. But this is among the once-off measures that are in jeopardy.
One measure that is on the table, however, is a rise in the income thresholds for student grants to contribute towards the €3,000 annual registration charge from €115,000 per household to €150,000. The grant for those qualifying would also potentially rise from €500 to €1,000.
Housing
The Government has rolled out several measures during the year to encourage the development of more homes, particularly apartments. One potentially contentious way of incentivising development is tax cuts for developers.
Government sources have said that a proposed reduction in VAT on the sale of new apartments has not yet been agreed, although they confirmed that such a move is under consideration as part of negotiations for Budget 2026. Abolition of the VAT is unlikely.
Renters
A rent tax credit looks set to be retained, but it is unclear if it will increase as has been the case in recent years.
Increasing the credit by €100 for a single person and €200 for a jointly assessed couple would cost €20 million, while doubling it to €2,000 for an individual and €4,000 for a couple would cost €160 million in a full year, according to the Department of Finance.
A higher rent tax credit for tenants in new-build apartments is being considered to shield such renters from the impact of changes to rent pressure zones. The alterations, taking effect in March, will mean the removal of a 2 per cent cap on rent increases in newly built apartments.
While sources confirmed a higher rent tax credit for such tenants had been discussed, a senior source cautioned it was “unlikely”.
