Legislation for the 2026 tax year

Summary

Details of the 2026 tax year legislation changes effective from 1 January 2026 when using Sage 50 Payroll Ireland.

Description

The Minister for Finance, Paschal Donohoe, announced these measures in Budget 2026 on 7 October 2025.

NOTE: To view a summary of Budget 2026, go to revenue.ie

Pay as you earn (PAYE)

Tax rates remain unchanged for 2026.

Personal circumstances	2026 €
Single or widowed, or surviving civil partner, without a qualifying child	44,000 @ 20% Balance @ 40%
Single or widowed, or surviving civil partner, qualifying for single person child carer credit	48,000 @ 20% Balance @ 40%
Married or in a civil partnership, one spouse or civil partner with income	53,000 @ 20% Balance @ 40%
Married or in a civil partnership, both spouses or civil partners with income	53,000 @ 20% with increase of 35,000 max. Balance @ 40%

▼ Tax credits

Tax credit	2026 €
Single person	2,000
Married or in a civil partnership	4,000
Employee Tax Credit	2,000
Earned Income Tax Credit	2,000
Widowed person or surviving civil partner (without qualifying child)	1,900
Incapacitated Child Credit	3,800
Blind Tax Credit Single person Married or in a civil partnership: one spouse or civil partner blind both spouses or civil partners blind	1,950 1,950 3,900
Dependent relative	305
Home carer tax credit	1,950

Universal Social Charge (USC)

The 2% USC rate band increases by €1,318, raising the ceiling from €27,382 to €28,700. This ensures full-time minimum-wage earners remain outside the higher USC rate bands.

2026 €	Rate
Income up to 12,012.00	0.5%
Income from 12,012.01 to 28,700.00	2%
Income from 28,700.01 to 70,044.00	3%
Income above 70,044.00	8%

Reduced USC rates continue to apply for:

Individuals aged 70+ with income up to €60,000
Full medical card holders under 70 earning up to €60,000
These reduced rates remain in place until 31 December 2027

National minimum wage (NMW)

From 1 January 2026, the NMW rate increases by €0.65 from €13.50 to €14.15 per hour. This affects PRSI thresholds and the 2% USC band ceiling.

PRSI threshold increase

From 1 October 2026, both employer and employee PRSI contribution rates increase by 0.15%. The threshold rises from €527 to €552 per week.

Benefit in Kind (BIK): Employer-provided vehicles

From 1 January 2026:

A new Category A1 applies to zero-emission cars. Apply BIK at 6–15% of the car’s OMV, depending on annual business mileage.

The temporary OMV reduction remains in place on a tapered schedule:

€10,000 in 2026
€5,000 in 2027
€2,500 in 2028

The 48,001 km lower mileage limit for the highest mileage band now applies permanently.

Auto-enrolment retirement savings scheme

Auto-enrolment (My Future Fund) begins on 1 January 2026. Employers must automatically enrol eligible employees. NAERSA manages enrolment, contributions, and opt-out requests.

Foreign earnings deduction (FED)

Residents in Ireland for tax purposes who spend time working abroad can claim FED. There are certain conditions which they need to meet to qualify. For more information on qualification rules, check Revenue's guidance.

Extended until 2030
Maximum claim rises to €50,000
Extended to include the Philippines and Türkiye

Key Employee Engagement Programme (KEEP)

Extended to 31 December 2028, pending EU State Aid approval
All existing conditions remain unchanged

Statutory Sick Pay

Current status: Employers must give employees five statutory sick days in 2025
Future plans: The planned increases to seven days in 2025 and 10 days in 2026 have been postponed
Reason for delay: The government is reviewing the scheme’s impact before confirming the next phase

Small benefit exemption

No announced changes for 2026. The 2025 rules remain in place:

Up to €1,500 in non-cash benefits
Up to five benefits per employee each year

What does this mean for payroll?

Your payroll year end software update includes the legislation changes ready for the 2026 tax year.

Just download and install the update before your first 2026 payroll run. We expect the update to be available in late November 2025. We'll let you know when it's ready.

Changes to employees

RPNs for 2026 reflect:

Any changes to employee tax credits or USC bands
New PRSI contribution rates