With only three days until Minister for Finance Paschal Donohoe and Minister for Public Expenditure Jack Chambers unveil the contents of Budget 2026, RTÉ's Economics and Public Affairs Editor David Murphy looks ahead at ten elements to watch out for during their Dáil speeches.
1. Income tax
This is going to be the nasty surprise on Budget Day.
Wages are rising by an average of 5%. The Government often adjusts the point at which people pay the higher rate of tax, so earners aren't hit with bigger bills as their salaries increase.
Last year's budget saw the point at which people pay the 40% rate of tax increase by €2,000 to €44,000.
The Programme for Government also includes a commitment to index tax bands. But in a significant change from the last four budgets, Minister for Finance Paschal Donohoe yesterday said the tax bands will remain unchanged in 2026.
It means workers who get a pay rise will also pay more tax. Minister Donohoe says if he were to index the tax bands, it would cost up to €1.3bn in a Budget, with scope for tax cuts of €1.5bn.
2. VAT cut for hospitality
While many workers will face higher tax bills, it is partly to facilitate tax cuts elsewhere. A VAT cut for the hospitality industry from 13.5% to 9% is expected to be announced on Tuesday.
It will be a boost for cafés, restaurants, delis, catering and fast-food outlets.
If it were introduced in January, the measure would cost the State €684m in tax foregone, but it seems more likely it would take effect from July, which would cost €342m in 2026.
But the reduction in tax revenue would then become permanent.
While it will help many indigenous firms, it will also aid multinationals such as McDonald’s, Starbucks and Burger King.
The Government could be open to a legal challenge if it attempted to limit the benefit to Irish-owned companies.
Many hospitality companies say they will close if the tax is not reduced in Tuesday’s Budget.
Others argue it is a huge boost to one industry at the expense of others.
3. Tax on gas and electricity
Many energy customers are experiencing higher bills, but the Government is adamant that there will not be a repeat of the one-off measures in recent budgets.
VAT on gas and electricity is currently 9% but is due to revert to its original rate of 13.5% this month. Expect the lower rate to be rolled over again in the Budget.
4. Housing
The Government says housing is its number one priority. After a 24% slump in apartment building last year, the Coalition is considering how it can incentivise this category of construction.
It is likely that it will cut the VAT on the sale of apartments from its current rate of 13.5% to 9%.
This week, Taoiseach Micheál Martin said the Budget would have "supportive measures in respect of housing" and added: "We are looking at closing the viability gap in terms of apartments."
Tánaiste Simon Harris said the Budget will include measures to tackle vacancy and dereliction.
5. Rent tax credit
Tenants currently receive an annual tax credit of €1,000 for an individual or €2,000 for a couple if jointly assessed for tax. The credit was increased in last year’s Budget.
The Coalition has committed to progressively increasing the credit.
6. Minimum wage
Workers, particularly those on lower wages, are struggling to make ends meet, as grocery price inflation is running at 5%.
The State’s Low Pay Commission, which is made up of unions and employers, advises on increases to the minimum wage, which sets a floor for hourly rates.
The Government usually follows the Commission’s advice.
It is understood to have recommended that the minimum wage should increase by 65c an hour to €14.15.
This, or something close to it, is going to be announced on Budget Day. It matters for the 200,000 who rely on it, predominantly women, younger people and those with disabilities.
Youth groups and unions say it is unfair that workers under the age of 20 are paid lower rates.
7. Universal Social Charge and Employers’ PRSI
If the Government increases the minimum wage, it is also likely to alter the Universal Social Charge to ensure that lower-paid workers don’t fall into a higher band of USC.
It will also have to alter Employer's PRSI to ensure those on the minimum wage do not fall into the higher 8% band.
8. Social Welfare
There was a €12 increase in the weekly main social welfare rates for working-age recipients and pensioners announced in the Budget in October of last year.
If rates are to keep up with inflation, there would have to be an increase in the package for 2026.
9. Carers
The Coalition is acutely conscious that disability was a significant issue during the general election last November.
The Programme for Government commits the Coalition to "phasing out" the means test for the carers’ allowance.
Opposition parties want the Government to abandon the means test, but the Taoiseach this week stuck to the policy of phasing it out instead.
It is possible the Coalition will increase the income disregards, or the amount of income that is ignored when deciding if carers get the allowance.
10. Is the Government spending too much?
The overall spending increase is due to be €9.4bn in the Budget. Of that, €5.9bn will be the increase in current expenditure such as wages.
Capital spending will rise by €2bn. That leaves €1.5bn for tax cuts. But the VAT reductions on hospitality, apartment sales and energy will eat into that figure.
That will put huge pressure on ministers regarding where to allocate the other tax cuts. So, is the Government spending too much? Some economists think so.
The Central Bank, the Irish Fiscal Advisory Council and the Economic and Social Research Institute all warn that the spending increase of €9.4bn is too large.
