Budget 2027: What it means for SME owners

14 Oct

BUDGET UPDATE · 8 OCTOBER 2026

Budget 2027 was delivered on Tuesday 6 October. There's nothing dramatic for small businesses, but a handful of changes will touch your cash flow, your payroll and your tax bill, so we've pulled out the ones worth knowing about.

The short version

• Corporation tax: the 12.5% rate on trading profits is unchanged, and the small company preliminary tax threshold rises from €200,000 to €350,000.

• Payroll: minimum wage goes up 79c to €14.94 an hour from 1 January 2027, and the weekly earnings threshold for the higher employer PRSI rate rises from €552 to €600.

• Selling a business or shares: Capital Gains Tax falls from 33% to 31% for disposals from 7 October 2026.

• R&D: the credit stays at 35%, and the amount paid out in year one rises to €105,000.

• You personally: the 40% income tax band now starts at €46,500 for a single person, and the main tax credits go up €125 to €2,125.

Most of this starts on 1 January 2027, and several items still need the Finance Bill to confirm the detail. We'll update this post as that comes through.

Company tax and reliefs

The 12.5% corporation tax rate on trading income hasn't changed. The news here is about cash flow and reliefs.

Preliminary tax. The small company limit rises from €200,000 to €350,000 of corporation tax in your previous period, so more companies can use the simpler small-company rules. Separately, you'll meet the requirement if you pay at least 80% of this year's liability by the final instalment date and clear the balance within four months of your year end. The rule that treated a short second instalment as a short first instalment is being removed. Start dates aren't confirmed yet.

R&D tax credit. The rate stays at 35%, and smaller claims get their cash sooner.

• The first-year payment threshold goes from €87,500 to €105,000, so the first €105,000 of a claim is paid in full in year one.

• The cap on subcontracted R&D rises to the higher of 20% or €200,000, from the higher of 15% or €100,000.

• A new 5% uplift applies to qualifying R&D wage costs, subject to conditions still to come.

Start-up relief. The corporation tax relief for new companies (Section 486C) is extended by four years, to trades starting by 31 December 2030. Full relief applies where the tax liability is under €40,000, with marginal relief up to €60,000.

Investor reliefs. The Employment Investment Incentive, Start-Up Capital Incentive, SURE and Angel Investor Relief are all extended in their current form, subject to new EU state aid rules due on 1 January 2027. Worth knowing if you're raising from investors or investing in other businesses.

Selling shares or business assets. Capital Gains Tax falls from 33% to 31% for disposals on or after 7 October 2026, so it already applies. Development land stays at 33%.

Employing people

Minimum wage. It goes up 79c, from €14.15 to €14.94 an hour, from 1 January 2027.

Employer PRSI. The weekly earnings threshold for the higher rate of employer PRSI rises from €552 to €600, timed with the minimum wage increase. A 39-hour week at €14.94 comes to €582.66, which now sits under the new €600 line. The Government estimates the change saves €650 to €700 a year for each eligible employee.

PRSI keeps rising. The increases already legislated still go ahead, with the next one on 1 October 2027.

Reporting. From 1 January 2027 you can choose to report travel and subsistence, remote working allowances and Small Benefit Exemption payments to Revenue by the 14th of the following month, instead of in real time.

Skills. €150 million over three years has been set aside for skills, including AI and digital skills. Eligibility details haven't been published yet.

Childcare. The cap on childcare fees falls from €735 to €550 a month, reported from September 2027. That could matter for staff with young children.

Costs, fuel and supports

VAT. No change to the general rates or the registration thresholds (€42,500 for services and €85,000 for goods).

Fuel and energy.

• The carbon tax increase on petrol and diesel due on 14 October 2026 is pushed back to 1 May 2027, with another increase on 13 October 2027. Marked gas oil gets the same deferral.

• The temporary cut in petrol and diesel excise is wound back in stages on 28 February, 8 April and 1 May, and is fully restored on 30 June 2027.

• Carbon tax on kerosene and natural gas drops to €48.50 a tonne until 2030.

Vehicles. Vehicle Registration Tax rises by 1% for bands 3 to 20 from 1 January 2027. The electric vehicle relief is extended to 31 December 2028.

Funding and supports.

• The Growth and Sustainability Loan Scheme is expanded by €500 million, doubling it to €1 billion, and runs to June 2029. Loans go up to €500,000 on an unsecured basis.

• €4.5 million goes to the Local Enterprise Offices, including energy efficiency grants.

• Start Up Ireland gets €3 million to set up a gateway for new entrepreneurs, aiming to support 1,000 new start-ups.

If this is your sector. Cigarettes go up €1 a pack of 20 and e-liquid by 20c a millilitre from 1 January 2027. A €15 million scheme for rural pubs is coming, with no details yet. Farmers' flat-rate VAT addition is 4.8% for 2027.

You and your family

Income tax from 2027. The point where the 40% rate starts rises by €2,500, to €46,500 for a single person and €55,500 for a married couple with one income. The Personal, Employee and Earned Income credits each go up €125 to €2,125. The Employee credit is the one for people on payroll, and the Earned Income credit is the one for the self-employed. The 2% USC band now runs to €30,300, up from €28,700. The Department of Finance's own example is a single self-employed person on €50,000, who gains €691 a year.

Professional Services Withholding Tax. If you're a contractor or professional paid net of the flat 20% PSWT, personalised deduction rates will replace it, so what's withheld sits closer to what you actually owe. There's no start date yet.

Investment Account. From 1 July 2027, Irish resident adults can put up to €12,000 a year into a new Investment Account. The first €50,000 of value is tax free, with a flat 1% a year charged on anything above that. There's no Capital Gains Tax, exit tax or dividend tax inside the account. The 1% applies whether or not markets rise. Separately, tax on gains from funds and life assurance investment policies falls from 38% to 35% on 1 January 2027.

Passing on the business or gifting. The tax-free thresholds for gifts and inheritances received on or after 7 October 2026 are up:

• A child from a parent: €420,000, up from €400,000.

• Other close relatives: €44,000, up from €40,000.

• Everyone else: €22,000, up from €20,000.

Home and family. Help to Buy now refunds up to €35,000, the Rent Tax Credit rises to €1,150 and Rent-a-Room relief goes up to €16,000 a year.

What happens next

Much of the detail will be settled in the Finance Bill later this autumn, and we'll update this post once it confirms the dates and conditions. In the meantime, three things are worth a chat with your accountant:

• Whether the higher small company preliminary tax limit of €350,000 now applies to you.

• What the €14.94 minimum wage and the new employer PRSI threshold mean for your 2027 payroll.

• The timing of any planned sale of shares or business assets, now that the Capital Gains Tax cut applies from 7 October 2026.

This note is based on the Budget announcements of 6 October 2026, which may change as legislation is finalised. It is general information and does not constitute tax or financial advice.