Direct Domestic Investment

New measures not announced in Budget 2026

CGT – Entrepreneur Relief

• The Finance Bill provides confirmation of the increase in the revised Entrepreneur Relief lifetime limit for Capital Gains Tax (“CGT”) purposes from €1m to €1.5m and also introduces amendments to the application of the increased limit in respect of aggregation of previous disposals of chargeable business assets.
• The existing €1m limit will continue to apply to disposals of chargeable business assets in the period 1 January 2016 to 31 December 2025.
• From 1 January 2026, Entrepreneur Relief will apply up to a lifetime limit of €1.5m, with aggregation of prior disposals subject to a maximum aggregation amount of €1m in respect of disposals of chargeable business assets in the period 1 January 2016 to 31 December 2025. Effectively, this ensures individuals making disposals from 2026 onwards can benefit from the €500,000 increase in the lifetime limit in circumstances where they have previously disposed of chargeable business assets prior to 31 December 2025.

CAT – Business Property Relief

• There have been changes to Business Property Relief for Capital Acquisitions Tax (“CAT”) purposes. Business Property Relief allows for a 90% reduction in the value of assets qualifying for the relief for CAT purposes. The changes will apply to gifts/inheritances taken on or after 1 January 2026, which include:
  • The definition of “excepted assets”, which must be excluded in calculating Business Property Relief, has been expanded to include any asset which at the date of the gift or inheritance is required to be used for a specific purpose of the business concerned within 6 years of the gift/inheritance. There is provision for this relief to be clawed back if such asset is not so used within this six year period.
  • The Finance Bill also clarifies the replacement provisions for Business Property Relief to provide that where property in respect of which Business Property Relief has been claimed is disposed of for less than full consideration, the “full proceeds” will be deemed to equate to market value.  

Who will be affected and when? 

Entrepreneurs, start ups and scaling businesses, and their families will be impacted by the increase in Entrepreneur Relief with effect from 1 January 2026.  The changes to Business Property Relief will affect gifts and inheritances of qualifying business assets from 1 January 2026. 

What now?

The increase in the Entrepreneur Relief lifetime limit to €1.5m will take effect from 2026 so will benefit individuals selling businesses from 1 January 2026 onwards.  Individuals eligible for this relief may therefore now be inclined to delay disposals of their business assets until 1 January 2026 at the earliest in order to benefit from the increase in the limit (resulting in tax savings of up to a maximum of €115,000 per individual where full relief applies). 

Business owners considering transferring their businesses to successors qualifying for Business Property Relief from CAT on the gift will need to consider the impact of this new provision having regard to the use of assets historically and future intended uses.  Depending on the specific circumstances in each individual case, the new provisions may have differing impacts for businesses depending on whether the gifts are made before or after 1 January 2026.  The new provisions would be particularly relevant in circumstances where the business holds assets, such as cash or real property, which are not currently used for business purposes, but where there is an intention to put such assets to a specific business use in the coming years.  Advice should be sought where relevant.

Our view

We welcome the increase in the lifetime limit for Entrepreneur Relief to €1.5m and the clarification in respect of aggregation, to ensure that serial entrepreneurs who previously availed of Entrepreneur Relief can benefit from the increase in the limit on subsequent disposals from 2026 onwards. This ensures that entrepreneurs benefit from the lower 10% CGT rate on a larger amount of gains over their lifetime. 

However, the legislation as drafted is not entirely clear in relation to the aggregation in circumstances where there was a prior disposal of business assets with a chargeable gain realised of less than €1m.  We would welcome clarification on this point, ideally confirming the 10% rate applies to the full extent on gains realised on disposals of chargeable assets from 2016. 

From a succession planning perspective, it would be important for business owners to assess the specific business purpose to which they intend to put assets held within their businesses in advance of making gifts where Business Property Relief is intended to be claimed on the gift.  Under the new provisions, the beneficiaries will need to ensure that assets affected by the changes are used for that business purpose within the six-year clawback period provided for in the Bill. Families currently contemplating gifts of business assets should immediately assess the impacts of these new provisions ahead of the 1 January 2026 implementation date.