With Budget 2026 unveiled on 7 October 2025, employees under the PAYE system should pay attention — several changes affect take-home pay, deductions, credits, and supports. Here’s what you need to know as a PAYE taxpayer.
Income Tax, USC & Credits
Income Tax Bands & Rates
The 20% (standard) and 40% (higher) income tax rates remain unchanged.
There may be a modest increase in the standard-rate band, helping protect employees from “bracket creep.”
No major income tax cuts were announced this year.
Universal Social Charge (USC)
The USC 2% rate band ceiling has been increased to €28,700.
This means low to moderate earners may see a small reduction in their USC burden.
Higher USC rates remain, and those with non-PAYE income over €100,000 may still face an additional surcharge.
Tax Credits & Reliefs
The Personal Tax Credit and Employee Tax Credit remain unchanged.
No major increases were announced for personal or PAYE credits.
The Research and Development (R&D) Tax Credit has increased from 30% to 35% for qualifying expenditures, supporting innovation in Irish businesses.
Pay, Wages & Employment Costs
Minimum Wage
The national minimum wage increases to €14.15 per hour from January 2026.
This will directly benefit lower-paid workers and part-time employees.
PRSI / Social Insurance
Employee PRSI increases to 4.35% from 1 October 2025.
Employer PRSI also rises, which may impact wage structures or employment costs.
These changes ensure continued funding for pensions and welfare schemes but slightly reduce net pay for workers.
Auto-Enrolment Pensions (Workplace Pensions)
From 2026, employees aged 23–60 who are not already in a workplace pension will be automatically enrolled.
Both employees and employers will contribute 1.5% of gross salary initially, with contributions increasing over time.
This scheme aims to boost long-term retirement savings for PAYE workers.
Benefit-in-Kind (BIK) Changes
The Benefit-in-Kind regime for company cars, accommodation, and other perks will be reviewed, with some rates potentially increasing.
Employees who receive non-cash benefits from their employer should check how these changes may affect their net pay.
Deductions, Reliefs & Other Worker-Relevant Measures
Mortgage Interest Relief
Mortgage interest tax relief is extended for another two years.
Homeowners paying mortgage interest may continue to claim this relief where applicable.
Renters’ Tax Credit & Housing Supports
The Renters’ Tax Credit is extended until the end of 2028.
This provides ongoing relief for employees renting their homes, particularly in high-cost urban areas.
Energy & Retrofitting
A record €558 million has been allocated for home energy upgrades and retrofitting.
This investment aims to reduce energy bills and carbon emissions over time.
VAT & Consumer Costs
The VAT rate for food, catering, and hairdressing services will fall from 13.5% to 9% from mid-2026.
The 9% VAT rate on gas and electricity will remain until 2030, keeping energy costs more stable.
Social Supports & Welfare for Employees
Even if you’re a full-time PAYE worker, Budget 2026’s social measures can still impact your household:
Core social welfare payments will increase by €10 per week.
Working Family Payment (WFP) thresholds will rise by €60 per week, expanding eligibility for more families.
Child Benefit increases by €16 weekly for children aged 12 and over, and by €8 for children under 12.
Fuel Allowance and other supports are also adjusted to help with cost-of-living pressures.
Helpful Resources & Further Reading
Government of Ireland — Budget 2026 Publications
https://www.gov.ie/en/department-of-social-protection/publications/budget-2026/Citizens Information — Budget 2026 Summary
https://www.citizensinformation.ie/en/money-and-tax/budgets/budget-2026/Department of Finance — Minister Donohoe’s Budget Statement
https://www.gov.ie/en/department-of-finance/speeches/statement-by-minister-donohoe-on-budget-2026/
In summary:
Budget 2026 offers modest gains for most PAYE employees, with some relief through USC changes and extended credits. However, PRSI increases and pension contributions will require employees to review their payslips and adjust for slight changes in net income.Staying informed and claiming every available relief remains the best way to ensure you’re not overpaying tax in 2026.