Employment tax - Budget 2026

Special Assignee Relief Program (SARP)

SARP provides income tax relief for certain employees who are assigned to work in Ireland from abroad. The Minister highlighted the importance that Foreign Direct Investment plays in our economy through the creation of employment and expansion of business in Ireland.

With this in mind, the Minister announced an extension of SARP until 31 December 2030, which is a welcome development.

The following changes will also take effect from 1 January 2026:

• To qualify for SARP from 2026 onwards, new entrants must have an annual base salary of at least €125,000.
• Amendments will be introduced to make certain administrative requirements more practical. Further details will be published in Finance Bill 2025.

Foreign Earnings Deduction (FED)

If an individual is resident in Ireland for tax purposes, but temporarily spends some time working abroad, he/she may be able to claim FED. FED reduces an individual’s income for income tax purposes.

The Minister announced that FED relief will be extended for a further five years, running until 31 December 2030.

The following updates will also take effect from 1 January 2026:

• The maximum amount of relevant employment income eligible for income tax relief will rise from €35,000 to €50,000.
• The relief will now also apply to qualifying workdays spent in the Philippines and Türkiye, broadening the scope of eligible overseas locations.
• Amendments will be introduced to make certain administrative requirements more practical, and to ensure the relief is appropriately calibrated. Further details will be outlined in Finance Bill 2025.

Key Employee Engagement Program (KEEP)

KEEP is a tax efficient share option scheme available to small and medium enterprises (SMEs).  KEEP was due to expire at the end of 2025, but will now be extended until 31 December 2028, subject to European approval.  

Tax treatment of pension Auto-Enrolment (AE) schemes

While not directly addressed in Budget 2026, one of the most significant upcoming changes will be the introduction of Auto Enrolment (AE) from 1 January 2026. AE is designed to support workers who are not currently part of a pension plan.

Finance Bill 2025 will contain amendments to the tax treatment for the Auto Enrolment (AE) Retirement Savings Scheme. The following amendments are expected:

• Amendments to clarify the tax treatment of AE retirement savings in the event of a participant’s death.
• AE provider schemes will be exempt from investment undertaking tax, supporting the growth and efficiency of retirement savings.
• Employer contributions to AE will be exempt from the Universal Social Charge (USC).

Benefit-in-Kind on company vehicles

The Benefit-in-Kind (BIK) rules for employer-provided cars will be updated from 1 January 2026 to include a new A1 category specifically for zero-emission vehicles. This category introduces reduced BIK rates ranging from 6% to 15%, depending on the level of business mileage.

The Minister announced that the temporary universal relief of €10,000, which applies to the Original Market Value for vehicles in Category A-D, is being extended on a tapered basis for three further years up to 31 December 2028.  The relief remains at €10,000 for 2026, reducing thereafter to €5,000 for 2027 and €2,500 for 2028.

The lower limit of the highest mileage band is being permanently reduced from 52,001 kms to 48,001 kms from 1 January 2026.

PRSI increase

Since 1 October 2025, the PRSI rates (employee and employer) increased by 0.1% for all PRSI classes.  For example, the Class A PRSI rates are now 4.2% for employees and 11.25% for employers.

With effect from 1 October 2026, the PRSI rates (employee and employer) will increase by 0.15% for all PRSI classes.

Minimum wage

Minimum wage is set to increase from 1 January 2026 from €13.50 to €14.15 per hour.