Finance (No. 2) Bill 2026 has now been published, providing the detailed legislative framework for a number of the measures announced in Budget 2027. Here we highlight five key takeaways for individuals, investors, business owners and families, including the new Individual Investment Account, lower tax rates for many retail investment products, a reduction in the standard Capital Gains Tax rate, higher Capital Acquisitions Tax thresholds and changes to the tax relief for donations to approved sports bodies.
While the publication of the Bill provides greater clarity on the scope, commencement and operation of these measures, the provisions may still be amended as the Bill progresses through the Oireachtas.
1. The New Individual Investment Account
The Bill provides the detailed framework for the new Individual Investment Account (IIA), which is subject to ministerial commencement order. An account may be opened by an individual aged 18 or over who is resident in Ireland and has a PPS number. It must be held in the individual’s sole name (joint accounts are not permitted) and the individual may hold only one account at a time.
Contributions may be invested in quoted shares and bonds on regulated EEA or equivalent third-country markets, qualifying UCITS and certain insurance-based investment products. Personal portfolio investments and shares or other assets acquired under employee share schemes are excluded. Cash may be held pending investment or transfer, but no interest may be paid on the cash balance.
Income, profits and gains arising within the account are exempt from income tax and capital gains tax, but an annual 1% Investment Account Tax applies to the amount by which the account’s average daily value exceeds €50,000. The account provider calculates, deducts and pays the tax to Revenue. Excess contributions are subject to a separate charge of 1% of the outstanding excess for each month it remains uncorrected.
Existing taxation regimes in place for retail investments, including the deemed disposal rule, will not apply to the account.
If the account holder becomes non-resident, they must notify the provider and generally cannot contribute to or transfer the account while the period of non-residence continues.
Providers must register with Revenue, report prescribed account and investor information annually and issue the investor with an annual statement. Transfers between qualifying providers are permitted under the statutory transfer process.
Individual Investment Account: Frequently Asked Questions
The relevant provisions are stated to apply from 1 January 2027, subject to commencement by ministerial order. However, the Government’s implementation roadmap indicates that IIAs are expected to become available from participating providers from 1 July 2027.
An individual must be aged 18 or over, resident in Ireland and have a PPS number. The account must be held in the individual’s sole name, and an individual may hold only one IIA at a time.
Up to €12,000 may be contributed in a year of assessment.
Permitted investments include quoted shares and bonds on regulated EEA or equivalent third-country markets, qualifying UCITS and certain insurance-based investment products. Personal portfolio investments and certain employee share scheme assets are excluded.
Income, profits and gains arising within the account are exempt from income tax and capital gains tax. However, a 1% annual Investment Account Tax applies to the amount by which the account’s average daily value for the year exceeds €50,000. The provider calculates, deducts and pays this tax to Revenue.
A loss arising within the IIA does not appear to be treated as a capital loss for tax purposes and may therefore not be available to offset gains or income arising outside the IIA.
Yes. The legislation does not impose a general lock-in period.
A monthly charge equal to 1% of the outstanding excess applies from the month in which the limit is exceeded and continues until the excess is corrected.
The provider must be notified. Generally, no further contributions may be made, and the account cannot be transferred while the period of non-residence continues, although the existing investments may remain in the account.
Yes. The legislation provides for a formal transfer process between qualifying account providers. The transfer must follow that process so that the account retains its IIA status.
The personal representatives must notify the provider, and no further contributions may be made. The account may continue during the administration of the estate for a limited period.
2. Tax Treatment of Fund investments
Rate of tax
As announced in Budget 2027, the tax rate applying to many fund and life assurance investments is due to reduce from 38% to 35% from 1 January 2027. This is a welcome move and helps narrow the gap between fund investments and direct investments, although it does not remove the difference entirely.
The eight-year deemed disposal rule remains
While the rate reduction is positive, the Finance Bill does not abolish the eight-year deemed disposal rule. Investors in funds may still be taxed on gains every eight years, even if they have not sold the investment or received cash from it. This remains one of the more challenging aspects of the Irish fund tax regime.
This is still not the same as ordinary capital gains tax
Even with the lower 35% rate, the fund regime remains different from ordinary CGT. In particular, investors generally do not get the same ability to use fund losses against other gains.
Irish fund units held through recognised clearing systems
Where fund units that are taxable at the existing 38% or new 35% rate are held through a recognised clearing system, the investor is already responsible for reporting and paying the tax through self-assessment. The Bill does not change this but instead, from 1 January 2027 it introduces a clearer statutory framework setting out the obligations of the taxpayer for funds held in a recognised clearing system and provides clarity regarding taxable events, how gains are calculated, the treatment of losses and the credit available for tax previously paid under the eight-year deemed disposal rules.
Investors will need to keep clear records of when units were acquired, what they cost, any switches or redemptions, and any tax already paid under the deemed disposal rules. The Bill includes credit mechanisms to prevent the same gain being taxed twice, but those credits will only be useful if the underlying records are available.
3. Capital Gains Tax & Capital Acquisitions Tax
The Bill confirms that the standard rate of Capital Gains Tax will reduce from 33% to 31%. The reduced rate applies to disposals of assets made on or after 7 October 2026. This is a modest but welcome reduction and should be factored into the timing of disposals already under consideration. Disposals of development land will still be subject to a rate of 33%.
The Bill also confirms the increases to the Capital Acquisitions Tax thresholds for gifts and inheritances taken on or after 7 October 2026:
| Current | Budget 2027 | Increase | |
|---|---|---|---|
| Group A | €400,000 | €420,000 | €20,000 |
| Group B | €40,000 | €44,000 | €4,000 |
| Group C | €20,000 | €22,000 | €2,000 |
The increases are relatively modest, so they may create additional capacity for lifetime gifts, but they do not remove the need to consider earlier benefits received by the beneficiary within the same threshold group.
Post-death support, maintenance and education payments
Previously, the post-death exemption for payments for the support maintenance and education of children applied only where both the disponer and the child’s other parent had died. The Bill removes the requirement for the other parent to be deceased. As a result, reasonable payments from the disponer’s estate for a child’s support, maintenance or education may qualify for the exemption even where the other parent is still living.
The exemption applies to a minor child, a child aged over 18 but not over 25 who is in full-time education, and a child of any age who is permanently incapacitated by physical or mental infirmity from maintaining themselves. The payment must still be consistent with the disponer’s normal expenditure immediately before death and reasonable having regard to the disponer’s financial circumstances at that time.
Where an estate is expected to continue paying a child’s support, maintenance or education costs, the disponer should ensure that the will gives the executors or trustees appropriate authority and should retain records showing the normal pattern of expenditure before death.
4. Termination payments and future pension lump sums
Under current rules a payment made on the termination of an office or employment may qualify for an exemption from income tax. The taxable amount is generally determined by comparing the available exemptions and applying the most favourable one. These exemptions are:
- The basic exemption of €10,160 plus €765 for each complete year of service.
- The increased exemption, which adds up to €10,000 to the basic exemption, provided the employee has not claimed the increased exemption in the previous ten years. The €10,000 uplift is reduced by the value of any tax-free pension lump sum received, or receivable in the future, from the relevant employment. Where that lump-sum entitlement is €10,000 or more, no increased exemption is available.
- The Standard Capital Superannuation Benefit, commonly known as SCSB. Broadly, this is calculated by reference to the employee’s average annual remuneration for the final three years of service, multiplied by completed years of service and divided by 15, less the value of any tax-free pension lump sum received or receivable from the employment. The SCSB can be more beneficial for longer-serving or higher-paid employees.
Any part of the termination payment exceeding the highest of the 3 available exemptions is generally subject to income tax and USC.
What the Bill changes
Currently, a future tax-free lump sum from an occupational pension scheme can reduce the tax relief available on a termination payment. The Bill extends this rule to other pension arrangements including PRSAs and retirement annuity contracts with effect from 1 January 2027.
If the employee permanently gives up the right to the future tax-free pension lump sum when their employment ends, it will not reduce the tax relief available on the termination payment.
Anyone expecting a termination payment should obtain an up-to-date valuation of all tax-free pension lump-sum entitlements and compare the basic exemption, increased exemption and SCSB before the package is finalised. From 1 January 2027, this review should include relevant pension arrangements such as PRSAs and retirement annuity contracts. An employee may wish to consider surrendering a future tax-free lump-sum entitlement, but this is an irrevocable decision and should only be made after considering the overall tax and pension consequences.
Defined Benefit Valuation Factors
While revised Defined Benefit valuation factors were signposted in the Minister’s Budget speech, the published Bill does not contain the revised factors or the legislative changes required to introduce them. The current factors therefore continue to apply unless and until separate legislation, amendments to the Bill or Revenue guidance provides otherwise.
5. Donations to Approved Sports Bodies
The Bill changes the tax relief for donations to approved sports bodies such that a new €1 million annual limit on tax-relieved donations made by an individual to sports bodies applies. If the donor is associated with the sports body, relief is also limited to 10% of the donor’s total income. The Bill also changes how these donations are treated for the domicile levy. Although a qualifying donation may reduce an individual’s income tax bill, it will not reduce their worldwide income when testing whether they exceed the €1 million domicile levy threshold.
Donors considering a significant donation before a business sale or other liquidity event should take advice on the timing and structure of the donation as the relief available will depend on whether the donation is made personally or by a company, any applicable limits or caps and any association with the sports body.
The Bill also allows donations to be made through an approved fundraising body set up by a national governing body. The fundraising body must pass the donation and any related tax repayment to the national governing body within 12 months, and the funds must be used for the approved project.
Looking ahead
The Bill should be kept under close review as it progresses through the Oireachtas to enactment. Committee Stage amendments, commencement orders and related Revenue guidance may alter the scope, timing or practical operation of the measures outlined above. Further assessment will be required once the enacted legislation and any supporting guidance are available.
Tax treatment depends on a person’s individual circumstances and may be subject to change. We recommend that you consult a tax adviser for confirmation on whether these tax benefits are available to you.
