Budget 2026 - Everything you need to know

Budget 2026 was unveiled on 7^th October and in this article we will look at some of the changes and updates to pensions, auto-enrolment, savings and tax.

Auto-Enrolment: Launch of My Future Fund

• Minister Chambers confirmed that the national auto-enrolment scheme (My Future Fund) will launch as planned in January 2026, mandating enrolment for employees aged 23–60 earning over €20,000 if not already in an employer pension plan.
• The Tax Treatment of Pensions Finance Bill 2025 will provide for additional amendments to the tax treatment for the auto-enrolment (AE) retirement savings scheme. These will address the tax treatment of AE retirement savings on the death of the participant. Further amendments are also required to exempt AE provider schemes from investment undertaking tax, and to provide an exemption from USC for employer contributions to AE.
• Employee and employer contributions start at 1.5% of gross earnings, with a further 0.5% State top-up; these rates will increase over the next decade, reaching a total 14%.
• Opt-outs are only permitted in designated windows after initial enrolment or after contribution increases.

State pensions

• The State pension (contributory) personal rate will increase by €10 per week for 2026 from €289.30 to €299.30 per week (assuming at least 2080 full rate contributions in order to obtain the maximum rate of State pension (contributory) being awarded at State pension age).
• Ancillary social welfare rates were also increased.

Standard Fund Threshold (SFT)

• The SFT (the maximum pension fund) will rise by €200,000 per year, from its current amount of €2m and reaching €2.8m in 2029.
• SFT path: €2.2m for 2026, €2.4m for 2027, €2.6m for 2028, and €2.8m for 2029.
• The Retirement Lump Sum formula is capped at €500,000.

Personal Tax: Income tax, PRSI, and USC

Personal taxation

Minister Donohoe confirmed that there will no changes to personal taxation for 2026, so the tax rates and tax bands remain unchanged for 2026.

PRSI rates for employers and employees

• In October 2025 there was an increase of 0.1% to both employer and employee PRSI rates, ahead of Budget 2026.
• From 1^st October 2025, Class A PRSI rates are now 4.2% (were 4.1%) for employees and 11.25% (were 11.15%) for employers if weekly earnings are above €527 (and 9% Class A employer PRSI on weekly earnings up to €527).
• Faced with an aging population and rising state pension costs, Employee, Employer, and Self- Employed rates of PRSI will all increase each year, having begun in October 2024, until 2028 (2024 = 0.1%, 2025 = 0.1%, 2026 = 0.15%, 2027= 0.15%, 2028 = 0.2%).
• State Retirement age remains at 66 for now (but with an option to defer State Pension Contributory between ages 66 and 70, potentially increasing the payment amount).

Universal Social Charge (USC)

• There were no major changes to USC rates or bands.
• The ceiling of the 2% rate of USC is being increased by €1,318 from €27,382 to €28,700. This will ensure that a full-time worker on the minimum wage who benefits from the increase in the hourly minimum wage rate from €13.50 to €14.15 will remain outside of the highest rates of USC.

The USC concession for medical card holders is being extended for a further two years to 31 December 2027. Reduced rates of USC apply to individuals who have a full medical card and whose income is €60,000 or less per annum. The reduced rates of USC are 0.5% on the first €12,012 and 2% on the balance.

Taxation of life policies, exit taxes, and savings

• The rate of Life Assurance Exit Tax has been reduced from 41% to 38%.
• DIRT (Deposit Interest Retention Tax) and Capital Gains Tax (CGT) remains at 33%.
• Corporate exit tax rate remains at 25%, in line with corporation tax rate on Investment (non-trading income.
• Insurance levy is maintained at 1%.

The rate change applies to domiciled Irish funds and life assurance policies, other than those applying to companies and personal portfolio funds. It will also reduce the rate that apply to equivalent offshore funds (includes ETFs subject to tax under this regime) and certain foreign life assurance policies.

This comes on the back of the of the recent government Fund Sector 2030 Report which included ‘domestic life assurance products’ and outlined and number of recommendations:

• Remove the eight-year deemed disposal requirement
• Align the Investment Undertaking Tax (Exit Tax) and Life Assurance Exit Tax rate with the Capital Gains Tax rate (currently 33%)
• Allow for a limited form of loss relief
• Repeal the 1% Life Assurance Levy

The current government had stated that where appropriate tax measures had been identified that these would be implemented over “Multiple Bill Cycles”. We may see some further information in the coming Finance Bill, but hopefully this is the first step towards harmonisation with other investment vehicles.

Capital taxes and inheritance tax

There were no changes in the CAT Thresholds:

• The Group A Threshold (gifts or inheritance from parent) remains at €400,000.
• The Group B Threshold (gifts or inheritance from brother/sister/aunt/uncle/grandparent/foster child) remains at €40,000.
• The Group C Threshold (relationship other than A or B) remains at €20,000.