Budget 2026: What Payroll Professionals in Ireland Need to Know

Budget 2026 has landed, and while the headlines focus on cost-of-living supports and housing, payroll professionals have their own set of updates to digest.  

From tax band tweaks to minimum wage increases, here’s what matters most for those managing payroll in Ireland - and what it means in practice.  

In Budget 2026, alignment with recommendations from the Low Pay Commission points toward a further uplift to Ireland’s National Minimum Wage - rising from €13.50 to €14.15 per hour from January 2026.   

This 65c per hour increase has been one of the hot-button topics in discussion of this year’s budget and aims to support low-income workers and align with the government's commitment to a national living wage.  

This change will directly impact payroll calculations for hourly, part-time, seasonal, and entry-level staff. Payroll teams should be aware of these impending changes to their payrolls in 2026. Adjustments may be needed for overtime calculations and allowances that are based on the minimum wage rate.  

See also: National Living Wage Guidelines

Budget 2026 brought important updates to the Universal Social Charge (USC) that will impact payroll calculations starting January 2026. The headline change is an increase in the ceiling of the 2% USC band from €27,382 to €28,700, meaning more income is now taxed at this lower rate before moving to higher USC bracket  

For self-employed individuals with income over €100,000, the surcharge rate of 3% still applies, making their top USC rate 11%.  

Payroll Impact:  

More income taxed at lower USC rates: Employees earning between €27,382 and €28,700 will see slightly reduced USC deductions, providing modest tax relief.  

• System recalibration required: Payroll systems must be updated to reflect the new band thresholds and rates to ensure accurate deductions.
• BIK and other taxable benefits: Review how USC changes interact with Benefits-in-Kind and other taxable perks to avoid under- or over-deductions.  

The temporary reduction in the Original Market Value (OMV) used to calculate Benefit-in-Kind (BIK) for company cars (categories A–D) and vans will be extended on a tapered basis until 31 December 2028. This extension means the BIK relief will gradually decrease over the next three years, giving employers and employees time to adjust. 

From 1 January 2026, the lower mileage threshold for the highest Benefit-in-Kind (BIK) band will be permanently reduced from 52,001 km to 48,001 km. 

In addition, new BIK rates will apply to zero-emission company cars. A new ‘A1’ emissions category will be introduced, with rates ranging from 6% to 15%, depending on annual business mileage. 

See also: Free Benefit in Kind (BIK) Calculator

Payroll Impact:  

If your organisation has employees who qualify, this concession must be applied correctly. Revenue will likely issue updated guidance. Payroll teams should monitor for this and ensure systems can handle the exemption logic

 The reduced USC rate for those with a full medical card and earning less than €60,000/year has been extended until the end of 2027.  

Budget 2026 moved away from one-off payments, instead increasing support across the board with general increases of €10. 

While not all will be processed through payroll, some may require:  

• Reporting through payroll systems
• Tax treatment clarification
• Employee communication and support 

Payroll Impact:  

Stay tuned for Revenue guidance on how these payments should be handled. In the meantime, prepare to field employee questions and ensure your payroll software can accommodate any ad hoc payments.  

Beyond the headline changes to USC and the minimum wage, Budget 2026 also introduced several other measures with implications for payroll professionals:  

1. Tax Credits and Thresholds  

No major changes were announced to personal tax credits or standard rate cut-off points for 2026, so payroll calculations in these areas will largely remain consistent. However, ongoing monitoring is advised as Revenue may issue clarifications post-Budget.  

2. PRSI (Pay Related Social Insurance)  

PRSI rates and thresholds remain unchanged for 2026, maintaining continuity for employers and employees alike. Payroll teams should verify that system settings reflect the current rates to avoid deduction errors.  

3. Pensions and Retirement Contributions  

Budget 2026 reaffirmed no immediate changes to tax relief limits for pension contributions. Payroll professionals should stay alert for any future announcements around pension reform and Auto Enrolment in Ireland, as these can significantly affect payroll tax calculations.  

See also: Auto-Enrolment Guide for Irish Employers | Clear Answers & Compliance Tips 

4. Statutory Payments  

There were no changes to statutory sick pay, maternity/paternity leave payments, or other social welfare-related payments directly impacting payroll. However, organizations are encouraged to review their policies in light of evolving employment law

Public Sector Pay Agreement  

While not a direct part of Budget 2026, payroll teams in the public sector should be aware of the ongoing Public Sector Pay Agreement (2024–2026), which continues to impact pay calculations this year and beyond. This agreement includes phased pay increases across grades and introduces a Local Bargaining mechanism allowing departments to negotiate additional pay adjustments for specific groups or roles.  

Payroll Impact:  

• Multiple pay increases are scheduled through to mid-2026, requiring careful tracking and implementation in payroll systems.
• The Local Bargaining mechanism adds complexity, as pay adjustments may vary between departments or employee categories.
• Close coordination with HR and finance is essential to ensure accuracy and compliance.
• The first instalment of the Local Bargaining increase (1%) is due from 1 September 2025.  

Payroll professionals managing public sector payrolls should continue to monitor these developments closely to ensure timely and accurate application of all pay changes.  

Carer’s Allowance  

Budget 2026 delivers change for full-time carers through an increase in the Carer’s Allowance income disregard - the amount carers can earn without affecting their entitlement to the payment. 

From January 2026, the weekly income disregard for single carers will rise by €375, bringing it to €1,000 per week. This means a single carer working part-time can earn just over €54,000 annually and still receive the full Carer’s Allowance. 

For couples, the disregard increases to €2,000 per week, allowing a household where one partner earns up to €108,000 annually to still qualify for the full payment. 

At SD Worx, we’re already analysing Budget 2026 so businesses like yours don’t have to play catch-up. Gain confidence knowing your payroll could be fully compliant, efficient, and ready for change, with expert support behind you.

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