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Budget 2026 First Look: What's in It for R&D & Small Businesses

Minister for Finance Jack Chambers delivered Budget 2026, he did so against a backdrop of fiscal caution and political calculation.

With a general election looming and warnings about the structural deficit masked by corporation tax windfalls, this wasn't a budget for grand gestures. Yet buried in the €10.5 billion package are several incremental adjustments that matter deeply to innovation-driven businesses and small enterprises.

But incremental can still be significant when you're managing tight margins. However, do these measures deliver real support, or simply more administrative hoops?

Key Headlines for Innovation

The good news? The direction of travel is toward recognising R&D and innovation as strategic priorities. The frustration? Many of these changes require State Aid approval from the European Commission, which means delays and uncertainty about when they'll actually take effect.

The R&D tax credit gets a boost

The government increased the standard rate from 30% to 35% for the R&D tax credit, meaning for every euro you spend on qualifying R&D activity, you can now claim back 35 cents rather than 30.

The amounts you can receive, in cash or as an overpayment of tax, are received in three annual instalments:

• Year 1: 50% of the credit (or a lump sum if the credit allows for it)
• Year 2: 30% of the credit (or three fifths of the remaining balance)
• Year 3: 20% of the credit (or the remaining balance)

The first-year threshold will be rising to €87,500. This amount has been steadily rising in the last few years:

• Accounting periods beginning on or after 1 January 2023 and before 1 January 2024: €25,000

• Accounting periods beginning on or after 1 January 2024 and before 1 January 2025: €50,000
• Accounting periods beginning on or after 1 January 2025: €75,000

It stands to reason that accounting periods beginning on or after 1 January 2026 will benefit from the higher first-year threshold (although this date has not been confirmed).

Some capital allowances are being reformed

Capital allowances for intangible assets are getting a shakeup. The details are still emerging, but changes to balancing allowances suggest the government is trying to align Ireland's treatment of intellectual property with evolving international tax standards while preserving some competitive advantage.

Enterprise support budgets are expanding

The Department of Enterprise, Tourism and Employment saw increased allocations for artificial intelligence initiatives, regional enterprise development, and the core agencies, Enterprise Ireland and IDA Ireland.

In Budget 2026, €1.3 billion is being allocated to enhance competitiveness and productivity, for the promotion of regional enterprise, for AI, and to support indigenous businesses.

This signals continued commitment to the innovation ecosystem, even if the increases won't revolutionise what's on offer.

Existing reliefs get extended and enhanced

The Digital Games Tax Credit, which provides a 32% credit on qualifying expenditure, will continue to at least 2031 and now includes some more development activity. The Key Employee Engagement Programme (KEEP) – the share option scheme designed to help startups attract talent – has been extended with some improvements to make it more accessible. Film Tax Relief has also been amended to offer higher relief on VFX costs.

Changes to the R&D Tax Scheme: What It Means for Enterprises

If you're running a tech startup, a software development company, or any company that's already structured to document R&D activity, the increased credit rate and higher first-year threshold make your investment in innovation less punishing. Companies spending €200,000 to €2 million annually on qualifying R&D stand to gain the most in absolute terms.

Eligibility for the R&D tax credit hasn't fundamentally changed. You still need to prove you're resolving scientific or technological uncertainties, not just improving your product or adopting existing technology.

The administrative burden hasn't been addressed. Preparing a robust R&D claim requires detailed project documentation, technical reports, and often external expertise. For a company with ten employees and no dedicated finance function, the cost and complexity can outweigh the benefit. The 35% rate doesn't help if claiming feels like climbing Carrauntoohil in the fog.

Unfortunately, outsourcing R&D to subcontractors has not been addressed. Currently, firms can only claim relief on 15% of outsourced research expenditure, capped at €100,000. This significantly hampers small companies needing expertise that they can’t access in-house.

What This Looks Like in Practice

Tech startup with €1.5 million in qualifying R&D spend

Before Budget 2026, you could claim €450,000 (30% of €1.5 million). Now you can claim €525,000 (35%). That's an extra €75,000 – meaningful money that could fund another developer for six months or extend your runway.

If you’re claiming that as a cash credit, you’ll be receiving 50% in that first year.

Green/cleantech firm with €200,000 in qualifying R&D spend

You likely hit the R&D eligibility sweet spot – genuine technological uncertainty in a priority sector. The increased R&D credit aligns well with other government commitments to climate action.

You’ll have a claim of €70,000 (35% of €200k), which means you can access that entire amount in the first year, as it’s less than €87,500, reducing the wait time to get your cash.

You may even benefit from the changes to capital allowances for intangible assets as you look to build your IP strategy.

But you're probably capital-intensive, which means you need more than tax credits. You need grants, patient capital, and infrastructure support. Budget 2026 nods in your direction but doesn't fundamentally change your funding equation.

Regional artisan or smaller-scale innovator (€50,000 annual turnover)

Honestly? Very little in this budget will reach you directly. Your R&D tax credit has increased from 30% to 35%, but you were already receiving the entirety of it in the first year.

The R&D tax credit is designed for firms with scale and structured innovation programmes. Regional enterprise funding might eventually filter down through local development initiatives or collaborative networks, but you'll need to actively seek out intermediary supports. The Digital Games Tax Credit or KEEP aren't relevant to your business model. You're still navigating the Irish small business landscape largely on your own.

What to look for next?

Does Budget 2026 deliver a meaningful boost for innovation and small business? It depends on where you sit.

For R&D-intensive SMEs with the scale and sophistication to navigate the tax credit system, the move from 30% to 35% is genuinely helpful. The increased first-year threshold supports early-stage innovators, assuming they can handle the compliance burden.

Unfortunately, there has been no update to claiming for subcontracted work, which was much talked about in the run-up to the Budget and would really boost the eligible expenses Irish companies could include. The process of claiming has not changed, nor have eligibility criteria, which would have a huge positive impact for many claimants.

What to monitor in the coming months

• State Aid approval for tax relief and intangible asset measures – likely Q1 or Q2 2026, but not guaranteed
• Revenue guidance on the updated R&D tax credit
• Enterprise Ireland and IDA programme announcements showing how increased budgets translate into specific supports
• Uptake data on whether the enhanced incentives actually drive increased R&D investment or if administrative barriers still constrain take-up
• Political developments around the general election and any post-election budget revisions or policy shifts

We're here to help you make sense of these changes and structure your approach to maximise benefit. If you're unsure whether your activities qualify for the enhanced R&D credit, need support building your claim, or want to explore how these budget measures fit into your growth plans, get in touch.