Personal Tax

New measures not announced in Budget 2026

• The reduction of the rate that applies to Irish regulated funds, their offshore equivalents and foreign life assurance products from 41% to 38% will apply from 1 January 2026. This change applies to chargeable events, payments, and disposals related to offshore life policies and material interests in offshore and Irish funds.

• Mortgage interest relief - for 2025, the relief will be calculated based on the increase in interest paid in 2025 compared with interest paid in 2022, with maximum relief of €1,250. For 2026, the relief will be calculated based on 50% of the increase in interest paid in 2026 compared with the interest paid in 2022 with a maximum relief of €625.

• Sports donations - in the finance bill 2024, Individuals could elect to choose whether the income tax relief on donations to sporting bodies go to themselves or the sporting body. Finance Bill 2025 provides that this election is now irrevocable either from the date a taxpayer claims the relief or files a tax return or at the latest by 1 December in the year after the donation.

• Auto Enrolment Retirement Savings Scheme - the finance bill provides for the tax treatment that applies to pension schemes to also be extended to Auto Enrolment Retirement Savings Scheme. It provides for an exemption from inheritance tax on an inheritance comprising of a retirement fund which passes on the death of a person to that person’s child who is at least 21 years of age (it should be noted that such an inheritance is subject to income tax at 30 per cent).

• The High Income Earners specified reliefs has been amended to include the new living city initiative which applies to the conversion or refurbishment of certain commercial or industrial properties into residential properties, including utilisation of “over the shop” premises for residential purposes.

• The charge to CAT on a gift or inheritance of a policy of assurance has been deferred until the beneficiary disposes of their interest in the policy where this disposal occurs before (a) the policy matures, (b) is surrendered to the insurer for consideration or (c) the insurer otherwise makes a payment under the policy. A charge to CAT in this circumstance will arise at the time of the disposal. The amendment will apply to a disposal of a policy of assurance on or after 1 January 2026.
  

Who will be affected and when?

Investors in Irish and offshore funds will welcome the reduction of the tax rate on life assurance same from 41% to 38%, effective from 1 January 2026. Other than mortgage interest relief, all other changes above are effective from 1 January 2026.

What now?

Investors should carefully consider the timing of fund disposals and chargeable events to optimise tax outcomes under the new rates.

Homeowners with mortgages should assess the impact of the reduced mortgage interest relief and consider the timing of claims.

Individuals should review their pension arrangements once enrolled in the Automatic Enrolment Retirement Savings System to understand contribution levels, investment options, and how the scheme fits into their broader retirement planning.

Our view

The new Automatic Enrolment Retirement Savings System has been legislated for, with employer contributions now deductible expenses and state contributions exempt from income tax, encouraging wider pension participation. The establishment of the Automatic Enrolment Retirement Savings System is a significant step towards improving pension coverage in Ireland. Employees are encouraged to engage with their employers or pension providers to clarify any questions about the scheme, contribution rates, and how to maximise their retirement benefits.

The change to the Irish and offshore fund income and gain rates represents a welcome easing of the tax burden on investors. This change may enhance the attractiveness of Irish and offshore fund investments as part of personal investment portfolios, potentially improving after-tax returns. However, more should be done to simplify the treatment of these investments to bring them in line with the treatment of equity investments. It was announced that a roadmap is to be published early next year on how to simplify the reporting of various types of investments such as offshore funds / savings accounts.