Ireland’s Minister for Finance Paschal Donahue presented Budget 2026 on 7 October 2025. Finance Bill 2025, published on 16 October 2025, implements the tax measures announced in the budget. Budget 2026 delivered focused employment tax measures, extending key reliefs and refining benefit-in-kind rules to encourage sustainable transport and attract international talent.
The following are some of the headline issues covered in the budget speech regarding employment benefit issues.
As part of the government's tax measures to support climate change, some changes to the BIK rules for company-provided vehicles were announced, with a particular focus on promoting electric vehicles.
First, the temporary universal reduction of EUR 10,000 to the original market value (OMV) of company cars in categories A-D and all vans, which reduces the amount of BIK payable, is being extended on a tapered basis for three additional years, ending on 31 December 2028. The relief will remain at EUR 10,000 for 2026, decrease to EUR 5,000 for 2027, and to EUR 2,500 for 2028.
For electric vehicles, this extension will apply in addition to the tapered relief that applies to the OMV for calculating the taxable benefit on company-provided electric vehicles in 2026 and 2027, of EUR 20,000 and EUR 10,000, respectively.
Additionally, a new category for vehicles with zero emissions, Category A1, will be introduced in the BIK calculation tables. This category will offer reduced BIK rates for electric vehicles, ranging from 6% to 15% depending on business mileage, compared to the current rates, which range from 9% to 22.5% for electric vehicles in Category A. This change is expected to take effect from 1 January 2026.
Finally, the Budget 2026 Tax Policy Changes book confirms that the lower limit in the highest mileage band for BIK calculation will be permanently reduced from 52,001km to 48,001km from 1 January 2026.
The following example illustrates the BIK calculation for a company-provided electric vehicle in 2025, 2026 and 2027:
* Based on marginal income tax rates and PRSI Rates applicable at the start of each year.
In a move that was both expected and welcome, SARP has been extended for an additional five years, and now will run until 31 December 2030. This extension aims to support employers in attracting key talent from overseas.
Some amendments to the current SARP regime were also announced. Starting from 1 January 2026, new entrants to the scheme will need to have an annualised salary of EUR 125,000 or above to qualify, an increase from the current EUR 100,000 salary requirement. Importantly, existing claimants who continue to avail themselves of SARP in 2026 and beyond will not be affected by this change. While the term "new entrants" is not yet defined, it is anticipated, based on previous legislative provisions, that it will refer to individuals arriving in Ireland on or after 1 January 2026. Those who arrived in 2025 and for whom 2026 will be their first year of claim are expected to remain subject to the current SARP rules.
Further amendments to SARP are set to be introduced to simplify some administrative requirements. Details of these changes will be outlined in Finance Bill 2025. The official Budget 2026 documents included a paper on “Review of the Special Assignee Relief Programme” that incorporates stakeholder views on administrative requirements and may hint at the forthcoming changes.
FED, which was set to expire in 2025, is also being extended for five years, to 31 December 2030. The scheme, which allows a deduction for income tax purposes calculated by reference to the qualifying days an employee spends working in specific jurisdictions, is being amended so that from 1 January 2026 the maximum amount of relevant employment income that may qualify for income tax relief will increase from EUR 35,000 to EUR 50,000. In addition, the relief will be extended to apply to qualifying time spent working in two additional countries: the Philippines and Turkey.
Further amendments to FED are set to be included in Finance Bill 2025 to simplify some of the administrative requirements and to ensure the relief is appropriately calibrated. A paper titled “Review of the Federal Earnings Deduction” addressing these and other considerations was published with the Budget 2026 papers.
Finance Bill 2025 will provide for an extension of KEEP to 31 December 2028. This extension is subject to approval from the European Commission and will be commenced by Ministerial Order on receipt of such approval.
Mark Hynes
BDO in Ireland
The following are some of the headline issues covered in the budget speech regarding employment benefit issues.
Changes to Benefit-in-Kind (BIK) for Company Vehicles
As part of the government's tax measures to support climate change, some changes to the BIK rules for company-provided vehicles were announced, with a particular focus on promoting electric vehicles.First, the temporary universal reduction of EUR 10,000 to the original market value (OMV) of company cars in categories A-D and all vans, which reduces the amount of BIK payable, is being extended on a tapered basis for three additional years, ending on 31 December 2028. The relief will remain at EUR 10,000 for 2026, decrease to EUR 5,000 for 2027, and to EUR 2,500 for 2028.
For electric vehicles, this extension will apply in addition to the tapered relief that applies to the OMV for calculating the taxable benefit on company-provided electric vehicles in 2026 and 2027, of EUR 20,000 and EUR 10,000, respectively.
Additionally, a new category for vehicles with zero emissions, Category A1, will be introduced in the BIK calculation tables. This category will offer reduced BIK rates for electric vehicles, ranging from 6% to 15% depending on business mileage, compared to the current rates, which range from 9% to 22.5% for electric vehicles in Category A. This change is expected to take effect from 1 January 2026.
Finally, the Budget 2026 Tax Policy Changes book confirms that the lower limit in the highest mileage band for BIK calculation will be permanently reduced from 52,001km to 48,001km from 1 January 2026.
The following example illustrates the BIK calculation for a company-provided electric vehicle in 2025, 2026 and 2027:
| 2027 | 2026 | 2025 | |
| Original Market Value | 50,000 | 50,000 | 50,000 |
| Electric Vehicle Relief | (10,000) | (20,000) | (35,000) |
| Tapering Relief | (5,000) | (10,000) | (10,000) |
| Revised OMV | 35,000 | 20,000 | 5,000 |
| BIK Rate | 15% | 15% | 22.5% |
| Taxable BIK | 5,250 | 3,000 | 1,125 |
| Tax Cost (including ER PRSI)* | 3,331 | 1,904 | 712 |
* Based on marginal income tax rates and PRSI Rates applicable at the start of each year.
Extension of Special Assignee Relief Programme (SARP)
In a move that was both expected and welcome, SARP has been extended for an additional five years, and now will run until 31 December 2030. This extension aims to support employers in attracting key talent from overseas.Some amendments to the current SARP regime were also announced. Starting from 1 January 2026, new entrants to the scheme will need to have an annualised salary of EUR 125,000 or above to qualify, an increase from the current EUR 100,000 salary requirement. Importantly, existing claimants who continue to avail themselves of SARP in 2026 and beyond will not be affected by this change. While the term "new entrants" is not yet defined, it is anticipated, based on previous legislative provisions, that it will refer to individuals arriving in Ireland on or after 1 January 2026. Those who arrived in 2025 and for whom 2026 will be their first year of claim are expected to remain subject to the current SARP rules.
Further amendments to SARP are set to be introduced to simplify some administrative requirements. Details of these changes will be outlined in Finance Bill 2025. The official Budget 2026 documents included a paper on “Review of the Special Assignee Relief Programme” that incorporates stakeholder views on administrative requirements and may hint at the forthcoming changes.
Extension of Foreign Earnings Deduction (FED)
FED, which was set to expire in 2025, is also being extended for five years, to 31 December 2030. The scheme, which allows a deduction for income tax purposes calculated by reference to the qualifying days an employee spends working in specific jurisdictions, is being amended so that from 1 January 2026 the maximum amount of relevant employment income that may qualify for income tax relief will increase from EUR 35,000 to EUR 50,000. In addition, the relief will be extended to apply to qualifying time spent working in two additional countries: the Philippines and Turkey.Further amendments to FED are set to be included in Finance Bill 2025 to simplify some of the administrative requirements and to ensure the relief is appropriately calibrated. A paper titled “Review of the Federal Earnings Deduction” addressing these and other considerations was published with the Budget 2026 papers.
Key Employee Engagement Programme (KEEP)
Finance Bill 2025 will provide for an extension of KEEP to 31 December 2028. This extension is subject to approval from the European Commission and will be commenced by Ministerial Order on receipt of such approval.Mark Hynes
BDO in Ireland