Lisa Lokasto

Budget 2026 was billed as “measured and strategic,” a move away from one off supports and toward longterm stability. But for many, from small business owners to families and property developers, it will feel like a budget of bad timing, rising costs, and limited reliefs.

Still, amid the strain, there are a few welcome signs for entrepreneurship and innovation that deserve attention.

Hospitality: VAT Cut Arrives Months Too Late

The long awaited headline measure for hospitality is the reduction of the VAT rate on food, catering and hairdressing from 13.5% to 9%, but it doesn’t take effect until July 2026. This was expected.

That delay matters. Many cafes, restaurants and small operators are already battling high wages, energy bills, and disappearing margins. Waiting nine more months for relief could prove too long for some to stay afloat. This is an industry that faces daily closures.

Meanwhile, large fast food chains will weather the wait and benefit most once the cut kicks in. Because VAT must apply equally across a category, the measure can’t target struggling independents but the optics look poor when individual taxpayers received no meaningful income tax cuts.

Developers: helpful but is it Enough?

Budget 2026 introduced supports aimed at encouraging apartment construction:

• A 9% VAT rate for new-build apartments (from 8 October 2025 to 31 December 2030).
• A 125% deduction for qualifying construction costs, capped at €50,000 per unit giving a maximum tax saving of €6,250 per apartment for projects commencing within that window.

These are welcome improvements, but they don’t solve the underlying problem. The problem is that developers don’t want to build apartments because in most urban areas they still cost more to build than they can be sold or rented for. They’re just uneconomical.

Even with the new tax relief, many developments will still be financially unviable due to high construction costs, expensive finance, and slow planning approvals. Without deeper reforms like faster planning timelines developers will continue to favour houses over high density apartments, even though cities desperately need more of the latter to take some heat out of the housing crisis.

Landlords Leaving, Supply Shrinking

From March 2026, new tenancy rules will effectively bind landlords into six-year leases. While intended to give renters more stability, it is already prompting small landlords to exit the market rather than risk being tied into long term commitments.

Combined with sluggish new build activity, this exodus means fewer rental homes and continued upward pressure on rents, which is the opposite of what’s needed to stabilise the housing market.

Energy and Living Costs: Families Left in the Cold

Energy prices are expected to rise again this winter, yet there are no new electricity credits or cost of living supports for households.

Keeping the 9% VAT rate on gas and electricity until 2030 is welcome, but it’s a freeze, not a new relief. For many families it simply means higher bills without help.

Education costs (school books, transport, college expenses) continue to climb. Despite talk of fairness and inclusion, there was little fresh support for parents or students in this year’s Budget.

The standard student contribution (registration) fee was previously €3,000, but for the past few years, a €1,000 cost of living reduction was applied effectively lowering it to €2,000

As part of Budget 2026, the government has confirmed a permanent €500 cut in student contribution fees meaning the fee drops from €3,000 to €2,500, rather than staying at €2,000. So, in effect: the full €1,000 reduction is taken away (which was temporary), but half of it is restored via a permanent €500 cut. This has received a very mixed reception.

No change to personal taxes. Income tax bands and credits remain untouched.

No change to personal taxes
Income tax bands and credits remain untouched

There were no changes to income tax bands or personal tax credits in Budget 2026.

That may sound like stability, but in practice it means most households will end up paying more tax in real terms. With inflation last year (around 2%) and further increases expected in 2026, wages are rising nominally but because the tax bands aren’t being adjusted, more of that income is dragged into higher tax brackets.

The result is reduced purchasing power: households are paying a larger share of their income in tax, while simultaneously facing rising costs for energy, housing, education, and everyday essentials.

Carers and Social Supports

Core welfare payments, including pensions and carers allowances, will increase by €10 per week, and the full 100% Christmas bonus remains. While positive, advocates for carers and people with disabilities argue that this Budget still falls short of addressing the rising cost of living.

Employers: Wage and Pension Costs Surge

The national minimum wage will rise to €14.15 per hour from 1 January 2026, coinciding with the launch of the auto enrolment pension scheme.

The scheme applies to employees earning €20,000 or more per year, meaning many part time and seasonal staff will now be automatically enrolled. Employers must match employee pension contributions so an additional ongoing cost at a time of already rising payroll pressures.

And once the minimum wage rises, so do expectations across the pay scale. Supervisors, managers, and skilled workers all seek adjustments, pushing total labour costs even higher.

For many small and mid sized employers, that combination could prove the single biggest cost challenge of 2026 and one that risks feeding into inflation as higher operating costs drive up prices.

Two Bright Spots: Entrepreneurs and Innovation

Two genuinely positive measures stand out for business:

• Revised Entrepreneur Relief: From 1 January 2026, the lifetime limit rises from €1 million to €1.5 million, rewarding founders who sell or exit their businesses and encouraging reinvestment in new ventures.
• R&D Tax Credit: The credit rate increases from 30% to 35%, bolstering Ireland’s reputation as a hub for innovation and high-value investment. This enhancement benefits both large multinationals and SMEs investing in research and development.

These changes may not grab headlines, but they represent real, long term value for growth minded companies and investors.

summary:

The government’s fiscal discipline is clear but it comes at the expense of those facing immediate, real world pressures.

If inflation accelerates again in 2026, it won’t be because consumers are overspending. It will be because policy driven cost increases rippled through every sector.

What are you’re thoughts?

-Lisa.