No tax cut for workers as Social Welfare recipients get weekly and Christmas hike

TIPPERARY LIVE'S BUDGET 2026 COVERAGE IS SPONSORED BY PREMIER CREDIT UNION

The Government has finally unveiled its Budget 2026 package this Tuesday afternoon, with limited benefits for middle income earners and a major cut in the VAT rate for the hospitality sector.

Announcing the package in the Dáil on Tuesday afternoon, Minister for Finance Paschal Donohoe said that this budget focuses on investment in the future and "preparing for tomorrow" rather than personal tax cuts.

The Minister went on to discuss the "huge progress" achieved in restoring the health of the country's public finances, although he acknowledged "not everyone feels the benefit of it in their daily lives." With that being said, Donohoe did not announce any major measures in Budget 2026 which would help benefit many of the working people across the country struggling with the cost of living.

One of the few measures for workers was the increase in the minimum wage by 65 cent per hour to €14.15 per hour which will be implemented from the 1st of January 2026.

Of the €9.4 billion budgetary package, €8.1 billion was allocated for public spending and €1.3 billion for taxation measures. However, these taxation measures won't impact most workers.

So what are the big take-aways from Budget 2026?

VAT rate cut for hospitality and hairdressers

Following the 2024 general election, the government vowed to reduce the hospitality VAT rate and now it seems they have kept true to that promise in this year's budget. From 1st of July 2026, the VAT rate for food and catering services as well as hairdressers will be reduced from 13.5% to 9%. 

Hospitality groups, especially restaurants, have lobbied for this cut for years due to the rising costs faced by smaller businesses which is causing some to close.

However, many have argued that there is no solid evidence to suggest any closure crisis among Irish restaurants. Even the Restaurants Association of Ireland's report last month, which argued for the tax cut, admitted: "the RAI figures aren’t proof of a disastrous performance, relative to what would be the historic norm."

Another thing to consider here is that the huge tax cut will benefit the likes of major multinational chains such as McDonalds too, not just local small businesses. 

Although great news for the sector, the cut has actually impacted what everyone else gets in this budget as it takes up a significant amount of the €1.3 billion available for tax cuts this year. Yet as pointed out by analysts, only the hospitality sector will benefit from it. This budgetary measure will cost €232 million in 2026 and €681 million in a full year. 

No change on tax bands

Despite the continuing rise in the cost of living, the Government announced no change to tax bands in the budget. This will no doubt be frustrating for many across the country, especially middle income earners, who are finding it increasingly difficult to stretch their pay cheque amid inflation. 

This comes as no surprise as the Finance Minister warned prior to the official announcement on Tuesday that there would be no changes to personal taxes as it would have taken up the majority of the overall tax package. Here is where people can see the impact the cut to the VAT rates for the hospitality sector may have had on their own tax, as that instead took a major chunk of the overall package.

There was more targeted changes to USC, however. Minister Donohoe announced that the ceiling for the 2 per cent rate band for USC will be increasing by €1,318 to €28,700 from the 1st of January 2026. 

He also announced the extension of the USC concession that applies to those who have a full medical card and earn less than €60,000 per year so that the reduced rate of USC continues to apply for a further two years until the end of 2027.

Social Welfare

Minister for Public Expenditure Jack Chambers announced that the Christmas Bonus for long-term recipients of social welfare schemes will be paid out again this year to over 1.5 million people. It will be paid at a rate of 100% of the normal weekly payment.

In addition to this, €28.9 billion will be allocated to the Department of Social Protection next year, an increase of over €2 billion. This increase will see people receiving a weekly social protection payment get a €10 top up in their weekly payment. This will benefit 1.5 million people, including pensioners, people with disabilities, carers, jobseekers and lone parents.

The Carer's Allowance income disregard has also been increased to €1,000 for a single person and €2,000 for a couple.

For families, the weekly rates of the Child Support Payment has also increased by €8 for children under 12 and by €16 for children over 12 – the largest ever increase in the rate. This will bring the weekly payment to €58 for children under 12 and €78 for those over 12.

The back-to-school clothing and footwear payment has also been extended to two and three-year-olds.

The weekly Fuel Allowance has also risen by €5 to €8 and the eligibility criteria has been extended to all households in receipt of the Working Family Payment.

Energy measures

As expected, there were no energy credits in this budget. However, the 9% VAT rate on gas and electricity bills has been extended until the 31st December 2028 to alleviate the pressure on households.