Ireland's R&D tax credit scheme has always been one of the strongest incentives available to Irish businesses, and for 2026, it's getting significantly better.
A comprehensive government review in 2025 confirmed what the numbers already show: the scheme has grown from 73 companies claiming €70 million in 2004 to 1,804 companies claiming €1.4 billion in 2023. That's a near 20-fold increase in value, and the trajectory is still climbing.
Now the scheme is changing for the better in 2026 in three major ways: an increase in rates, higher first-year payment thresholds and less administration.
The Big News: Ireland's R&D Tax Credit Rate Is Rising to 35%
This is the headline change for 2026. The R&D tax credit rate is increasing from 30% to 35% for accounting periods beginning on or after 1 January 2026 (subject to final confirmation from government).
To put that in real terms: if your company spent €200,000 on qualifying R&D in 2025, you received a €60,000 tax credit. Under the new rate, that same spend generates a €70,000 credit. That's an extra €10,000 returned to your business for doing exactly what you were already doing.
When you combine the credit rate with Ireland's 12.5% corporate tax rate and the availability of a cash refund for loss-making companies, the overall package is genuinely difficult to match in comparable jurisdictions.
For Irish businesses, this means every euro spent on qualifying R&D now goes further. For multinationals choosing where to locate their R&D operations, it strengthens Ireland's proposition considerably.
The New First-Year Payment Threshold
Alongside the rate increase, the first-year payment threshold is being raised to €87,500. This is great news for SMEs and early-stage companies who can receive more of their credit earlier on.
Here's how the threshold has evolved:
Under the standard payment structure, R&D tax credits are paid out over three years: 50% in year one, 30% in year two, and 20% in year three. But if your total credit is at or below the first-year threshold, you receive the full amount in year one.
For a growing manufacturing SME or a software startup with €87,500 or less in qualifying credits, this is a meaningful cashflow improvement. Instead of waiting three years for the full amount, you get it all upfront.
What's Changing for R&D Employee Emoluments?
There's also a quiet but important administrative change for companies with large R&D teams.
Under the previous rules, qualifying for the full R&D tax credit on employee costs requires meeting a time-spent threshold. The new rule introduces a 100% emoluments qualification for employees who meet a 95% time-spent threshold, meaning that employees who spend 95% or more of their time on qualifying R&D activities can now be included in full, without partial apportionment.
For R&D-heavy businesses — whether that's a pharmaceutical company running a dedicated research division, a software company with a full-time development team, or an engineering firm with specialist innovation staff — this reduces the administrative burden significantly. You're spending less time on compliance paperwork and more time on the work that earns you the credit in the first place.
Is the R&D Tax Credit Scheme Working?
The 2025 review gave us a detailed picture of the current scheme.
Company size
- 1,579 SMEs claimed €290 million (89% of all claimants, representing 23.5% of total credit value)
- 225 large companies claimed €1.1 billion (11% of claimants, representing 76.5% of total value)
Sector breakdown
- Manufacturing leads at €937 million in credits claimed
- Information & Communication showing strong growth
Growth trends
After a decade-long plateau, 2023 saw meaningful growth across all company sizes:
Companies claiming R&D tax credits in Ireland now employ 253,000 people, reflecting the direct link between R&D incentives and high-value employment.
What Do the 2026 Changes Mean for Your Business?
For SMEs
The higher first-year threshold is the most immediately impactful change. If your qualifying R&D credit falls at or below €87,500, you receive it in full in year one. Combined with the new 35% rate, smaller R&D investments are now more viable. The growing number of SME participants shows that these reforms are working.
For large companies
The 35% rate provides greater certainty for multi-year R&D programmes. For companies making long-term investment decisions, a higher and stable credit rate is exactly the kind of policy consistency that supports capital allocation. For multinationals weighing where to locate R&D operations, it strengthens Ireland's foreign direct investment proposition.
For startups and pre-profit companies
The cash refund option remains one of the most important features of the Irish scheme. Unlike a tax offset, the refund is available to loss-making companies, meaning early-stage businesses can access cash from their R&D investment even before they turn a profit. The improved first-year payment threshold and the 35% rate make this even more valuable for companies in development-heavy phases.
What Happens Next?
The 35% rate is confirmed for accounting periods beginning on or after 1 January 2026, with final implementation details expected through the Finance Bill. The first-year payment threshold increase to €87,500 follows the same pattern of annual increases since 2023.
If you haven't already reviewed your R&D activities in light of these changes, now is the time to do it. The definition of qualifying R&D, the documentation requirements, and the mechanics of making a claim remain unchanged, but the value of getting it right has just increased.
Key Takeaways for 2026
- The R&D tax credit rate rises to 35% for all companies
- The first-year payment threshold increases to €87,500, improving cashflow for SMEs and startups
Whether you're already claiming or working out whether your activities qualify, the 2026 changes make a strong case for reviewing your R&D position before your next accounting period begins. If you'd like to explore how the new rate and thresholds apply to your business, get in touch with our team.
