Budget 2026 – Key Updates for Contractors and the Self-Employed

Budget 2026 marks a change in tone compared with last year’s measures. With the general election now behind us, the focus has shifted away from short-term giveaways and towards long-term investment in housing, infrastructure, and sustainability.

For contractors and the self-employed, there may not be sweeping tax cuts this year, but there are still several updates worth paying attention to — particularly around USC changes, Benefit-in-Kind relief, R&D credits, and supports for renters and homeowners.

Here’s a breakdown of the measures most relevant to independent professionals.

1. Personal Tax and USC

• No changes to tax credits or bands – your take-home pay remains broadly the same.
• Minimum Wage rises to €14.15 per hour, which may influence contract rates in some sectors.
• The 2% USC band increases to €28,700, protecting those on the minimum wage from higher USC charges. While contractors earning above this threshold won’t see much change, it helps ease the burden for lower-income earners and part-time contractors.

2. Social Welfare Supports

Although not direct tax measures, increases in child benefit and fuel allowance eligibility may be relevant for contractors balancing family and household costs. Notably:

• €10 weekly increase across core welfare payments.
• Child Benefit increased by €8 (under 12s) and €16 (12 and over).
• Fuel Allowance now available to Working Family Payment recipients.

3. VAT Changes

Two updates worth noting for professionals in services and property:

• Reduced VAT of 9% for food, catering, and hairdressing from July 2026.
• VAT on new apartment sales cut from 13.5% to 9%, which may support contractors in the construction sector.

4. Capital Gains Tax & Entrepreneurial Relief

If you’re considering selling a business or restructuring your contracting company, Entrepreneurial Relief has been reformed:

• Lifetime limit increased from €1 million to €1.5 million.

5. Benefit-in-Kind (BIK) on Company Cars

For contractors operating through limited companies and providing themselves with a company car, the temporary BIK relief continues, but on a phased basis:

• €10,000 relief in 2026.
• Reducing to €5,000 in 2027.
• €2,500 in 2028, before being abolished in 2029.

In addition, a new category for zero-emission vehicles has also been introduced, offering access to the lowest BIK rates — making electric cars a smarter choice for contractors considering new vehicles.

6. Housing & Renters Supports

With housing remaining a critical issue, several extensions will directly benefit contractors and freelancers:

• Help to Buy scheme extended.
• Rent Tax Credit of €1,000 (individuals) and €2,000 (couples) remains available for three more years.
• Mortgage Interest Relief extended for two years, tapering from €1,250 in 2025 to €625 in 2026.

For self-employed individuals looking to secure a mortgage, these supports offer continued relief, though tapering signals the need for careful financial planning.

7. Education & Upskilling

For contractors investing in continuous professional development:

• Third-level fees permanently reduced by €500, now €2,500.
• SUSI income threshold raised to €120,000 per household, broadening eligibility.
  This provides more accessible upskilling opportunities, a key priority in competitive industries like IT, engineering, and pharma.

8. R&D Tax Credit

Great news for contractors and small business owners engaged in innovation projects:

• R&D Tax Credit rises from 30% to 35%.
• First-year threshold lifted to €87,500, supporting smaller projects.

9. Other Notable Updates

• 9% VAT on utility bills extended to 2028, helping offset rising costs.
• Large-scale public investment announced: €3.5 billion for ESB and EirGrid, €2 billion for Metrolink, and €1.4 billion for Uisce Éireann — developments that will create ongoing opportunities for contractors in infrastructure and engineering.
• Carbon Tax increases to €71 per tonne, impacting fuel costs for contractors who drive frequently.

While Budget 2026 doesn’t bring sweeping personal tax cuts, it rewards long-term planning. Contractors should pay close attention to the phased reduction of BIK relief, opportunities in R&D incentives, and supports around housing and education.

At Icon Accounting, we’ll continue to monitor the impact of Budget 2026 for contractors and independent professionals, ensuring you’re positioned to make the most of every opportunity. If you have any questions on the tax update and expect changes, feel free to contact our team today.