Budget 2026 Ireland – Tax Changes for PAYE Workers
Every tax change announced in October 2025, what it means for your take-home pay, and how much better (or worse) off you are in 2026
Every tax change announced in October 2025, what it means for your take-home pay, and how much better (or worse) off you are in 2026
Budget 2026 was announced by the Minister for Finance on 14 October 2025 and took effect from 1 January 2026. For most PAYE workers, the overall package delivered a modest net improvement in take-home pay — the standard rate cut-off expansion and the USC band widening more than offset the PRSI increase for the majority of earners.
The headline measures for workers were:
Net result for most workers: a modest increase in take-home pay in 2026 versus 2025, driven primarily by the standard rate cut-off expansion. Higher earners benefit more in absolute terms from the PAYE change, while lower earners feel the PRSI rise relatively more.
This is the most significant change for mid-to-higher earners. The standard rate cut-off is the point at which income switches from being taxed at 20% to 40%. Raising it from €42,000 to €44,000 means an extra €2,000 of income is taxed at 20% instead of 40%.
PRSI (Pay Related Social Insurance) increased by 0.25 percentage points as part of a pre-announced roadmap to fund the sustainability of the State pension system. This applies to Class A workers (the vast majority of employees in the private and public sector).
The PRSI roadmap targets a rate of 4.7% by 2028. Workers can expect further small increases in the coming years.
The upper limit of the 2% USC band increased by €1,318. Income in this range that previously attracted 3% USC now only pays 2%.
The 0.5% band (€0–€12,012) and the 8% threshold (above €70,044) were unchanged in Budget 2026.
The two credits that apply to nearly all employees remained the same:
Other credits that changed:
The National Minimum Wage rose by 20 cent per hour to €13.50 from 1 January 2026. For a full-time worker on 39 hours per week, this equates to:
The table below compares estimated net take-home pay in 2025 versus 2026 at key salary levels, accounting for all changes: the cut-off increase (+), USC widening (+), and PRSI rise (−).
| Gross Salary | 2025 Net (est.) | 2026 Net | Change (yr) | Change (mo) | Main driver |
|---|---|---|---|---|---|
| €30,000 | €26,330 | €26,256 | −€74 | −€6.17 | PRSI rise outweighs minor USC saving (below cut-off) |
| €35,000 | €29,000 | €29,644 | +€644 | +€53.67 | Cut-off expansion saves €200 on income €42k→ partial; net positive |
| €50,000 | €38,600 | €39,342 | +€742 | +€61.83 | Full €400 cut-off saving; PRSI costs €125; net +€742 |
| €70,000 | €48,900 | €49,872 | +€972 | +€81.00 | Full €400 cut-off saving; PRSI costs €175; USC saving €13; net +€972 |
Note: 2025 figures are estimates using 2025 parameters (€42,000 cut-off, 4.1% PRSI, €27,382 USC 2% cap, same credits). Minor rounding applies.
The net winner from Budget 2026 is anyone earning between roughly €35,000 and €100,000. The cut-off change delivers a maximum €400 benefit that exceeds the PRSI cost of ~€87–€250 in this range. Workers below €35,000 who are below the cut-off threshold may find PRSI costs slightly outweigh gains.
The PRSI increase to 4.35% is part of a structured multi-year plan. The government's roadmap outlines the following trajectory:
| Year | Employee PRSI Rate | Change |
|---|---|---|
| 2024 | 4.00% | — |
| 2025 | 4.10% | +0.10% |
| 2026 | 4.35% | +0.25% |
| 2027 (planned) | ~4.55% | +0.20% |
| 2028 (planned) | ~4.70% | +0.15% |
The stated purpose is to shore up the Social Insurance Fund, which pays for the State pension, illness benefit, maternity benefit and other social welfare payments. With an ageing population, the fund is projected to face a deficit without additional contributions.
For workers: each 0.25% increase costs an additional €125/year per €50,000 of salary. Over the full 2024–2028 roadmap, the cumulative PRSI increase from 4.0% to ~4.7% will cost a €70,000 earner approximately €490/year more than in 2024.
The 2% USC band widening is a small but consistent annual Budget measure. Widening the band rather than reducing rates keeps more income in the lower bracket as wages rise — effectively preventing bracket creep where inflation pushes people into higher tax bands without real income gains.
The 2026 change in context:
| Year | USC 2% Band Upper Limit | Increase |
|---|---|---|
| 2023 | €22,920 | — |
| 2024 | €25,760 | +€2,840 |
| 2025 | €27,382 | +€1,622 |
| 2026 | €28,700 | +€1,318 |
While the 2026 widening is smaller than previous years, it continues the trend of keeping the 3% threshold roughly in line with average wage growth. The 8% USC threshold (€70,044) and the 0.5% band limit (€12,012) were both left unchanged in Budget 2026.
The Renters Tax Credit continues at €1,000 for a single person and €2,000 for jointly-assessed couples in 2026. To claim it, you must register your tenancy with the Residential Tenancies Board (RTB) and apply via Revenue's myAccount. The credit is a direct reduction in your tax bill — not a deduction from income — so it saves the full €1,000 regardless of what rate you pay.
This credit applies where one spouse or civil partner stays home to care for dependent children or other dependants. It increased from €1,700 to €1,800 in 2026, providing an extra €100 per year to eligible families.
Full-time minimum wage workers (39 hrs/week, 52 weeks) now earn approximately €27,378 gross per year. Their take-home pay after PAYE, USC and PRSI is approximately €24,100 — an effective rate of around 12%. Minimum wage earners with the full USC exemption (income under €13,000) are largely sheltered from the PRSI increase impact due to their low overall deduction rate.
Employer PRSI also increased alongside employee PRSI in Budget 2026. While this does not directly affect your take-home pay, it increases the overall cost of employment — something that can affect future wage negotiations and benefit packages.
The main changes for PAYE workers are: standard rate cut-off raised from €42,000 to €44,000 (saving up to €400/year); PRSI increased from 4.1% to 4.35%; the USC 2% band widened to €28,700; the minimum wage rose to €13.50/hour; and the Renters Tax Credit was maintained at €1,000.
The Personal Tax Credit and the PAYE Tax Credit both remain at €1,875 each (€3,750 combined), unchanged from 2025. The Home Carer Tax Credit increased to €1,800 and the Renters Tax Credit was kept at €1,000.
The cut-off moving from €42,000 to €44,000 means the first €44,000 of income is taxed at 20% rather than 40%. For anyone earning over €44,000, the saving is €2,000 × 20% = €400 per year. This is the biggest single Budget 2026 benefit for mid-to-higher earners.
PRSI rose from 4.1% to 4.35% as part of a multi-year roadmap to fund long-term pension sustainability. For a €50,000 earner, the extra cost is €125/year. Further increases of 0.15–0.20% are planned for 2027 and 2028.
The upper limit of the 2% USC band was widened from €27,382 to €28,700. This saves a maximum of €13.18/year for anyone earning above €28,700. The 0.5%, 3% and 8% bands were unchanged.
Yes. The national minimum wage increased from €13.30 to €13.50 per hour in Budget 2026, effective 1 January 2026. A full-time worker on minimum wage now earns approximately €27,378 gross per year.
Use our salary calculator to see exactly how Budget 2026 changes affect your specific salary — including the full PAYE, USC and PRSI breakdown with all 2026 figures applied.