The Irish Government has announced a significant enhancement to the R&D tax credit as part of Budget 2026, increasing the rate from 30% to 35%.
The change is designed to further support innovation-led businesses and reinforce Ireland’s position as a competitive location for research, development and technological advancement. The revised rate will apply to qualifying R&D expenditure incurred in accounting periods beginning on or after 1 January 2026, and will be legislated for in Finance Bill 2025.
What is the R&D tax credit?
Ireland’s R&D tax credit is a corporation tax incentive available to companies carrying out qualifying research and development activities within the State or the European Economic Area. The credit is calculated as a percentage of eligible expenditure and can be used to reduce a company’s corporation tax liability or, in certain cases, refunded as a cash payment.
Qualifying activities typically involve systematic, investigative or experimental work aimed at achieving scientific or technological advancement — across sectors including technology, manufacturing, life sciences, financial services and engineering.
What has changed?
- Rate up from 30% to 35% — increasing the potential return on qualifying expenditure and bringing Ireland’s incentive closer to the upper end of comparable international regimes.
- First-year payment threshold up from €75,000 to €87,500 — improving early cash flow for companies undertaking smaller or early-stage R&D projects.
- Simplified staff-cost rules — where an employee spends at least 95% of their time on qualifying R&D, 100% of their employment costs may be treated as eligible expenditure.
Who can benefit?
The enhanced credit is available to companies of all sizes, from startups to multinationals, provided they meet the qualifying criteria. While larger firms often claim substantial credits, the changes may be particularly impactful for small and medium-sized enterprises that rely on innovation but face tighter funding constraints.
Businesses operating in sectors not traditionally associated with “laboratory-based” research may also qualify, as the definition of R&D extends to technological problem-solving, product development, software development and process improvement.
Why it matters
“The increase to 35% is a strong signal of the Government’s continued commitment to fostering innovation and supporting investment in R&D.”
By improving the financial return on R&D activity and accelerating access to refunds, the revised incentive aims to encourage more companies to invest in long-term growth and innovation. As the changes take effect from 2026, businesses may wish to review their current and planned R&D activities to understand how the enhanced credit could apply going forward.
FinixHub supports businesses by providing financial clarity around R&D-related activities and expenditure, in line with current Revenue guidance. If you’re planning a claim under the new rules, a fractional CFO can structure your R&D claim and the financial records behind it.
Disclaimer: This article provides general information based on current Revenue and Citizens Information guidelines. Tax laws are subject to change. For specific advice tailored to your circumstances, please consult with our team.