Practical changes for business

Finance (No. 2) Bill 2026 delivers a blend of targeted technical amendments and more visible tax measures that will be of particular relevance to private Irish businesses over the coming years.

There is no single transformative reform, but several themes emerge: modest encouragement for entrepreneurship and investment, incremental easing of tax on gifts and inheritances, modernisation of the corporate tax code, and welcome flexibility in preliminary tax cash-flow management.

Taken together, the measures represent incremental steps in the right direction and should provide practical benefits for some owner-managed and growing businesses. The challenge for future Budgets will be whether policy can go further in supporting growth, succession and access to capital, while maintaining a workable tax system.

Caoimhe McLoughlin

Partner

KPMG in Ireland

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More flexibility on preliminary tax

The Bill makes a series of changes to the preliminary tax regime for chargeable persons, including companies, for accounting periods commencing on or after 1 January 2027. The changes provide:

Greater tolerance for forecasting errors where profits are volatile or late-year events change the tax outcome;
Reduced risk of interest and penalties where best-estimate preliminary tax falls marginally short; and
Improved ability to align tax payments with actual results, particularly for businesses with fluctuating earnings.

This additional flexibility does not remove the need for careful forecasting and monitoring. Companies will still need to understand the qualifying conditions and track compliance throughout the year.

While the reforms are welcome, further simplification could make the regime easier to navigate, particularly for smaller businesses.

Higher small-company threshold

The ‘relevant limit’ which is used to determine whether a company is a ‘small company’ for an accounting period increases from €200,000 to €350,000. This should bring more SMEs within the more flexible treatment currently available to smaller taxpayers, easing cashflow and compliance pressures for such businesses.

New four-month top-up window

The Bill introduces a four-month top-up window for companies whose timely preliminary tax payments cover at least 80% of their actual tax liability for the accounting period but falls short of the existing preliminary tax requirements.

These companies may make a further payment within four months of the end of the accounting period. If this additional payment brings total preliminary tax payments to 100% of the liability for that period, the top-up is treated as paid on time and should not attract late-payment interest.

The measure applies to both ‘small’ and ‘large’ companies that meet the conditions.

Changes to calculation of interest on underpayments

Currently, large corporate taxpayers that fail to meet preliminary tax obligations can face interest on an underpayment based on 45% of their actual tax liability for the period from the first instalment date.

Finance Bill 2026 amends this by aligning the interest calculation with the initial instalment payment obligation, such that interest is calculated using the lower of 45% of the tax liability for that accounting period or 50% of the tax liability for the preceding accounting period.

Capital gains tax reduction

Finance Bill 2026 reduces the standard capital gains tax rate from 33% to 31% for disposals on or after 7 October 2026. The reduction is welcome for business owners and investors considering disposals, although the headline rate remains high and the reduction does not apply to disposals of development land.

The reduction is a positive step to encourage transaction activity and the recycling of capital. More broadly, there remains a case for examining how capital gains tax interacts with reliefs for entrepreneurs, long-term investment and employee share participation.

A lower headline rate is helpful, but the wider regime also shapes decisions on whether founders and investors commit and reinvest capital.

Start-up corporation tax relief extended

The Bill extends the end date for the existing corporation tax relief for certain start-up companies from 31 December 2026 to 31 December 2030. For early-stage businesses and their backers, the extension provides continuity and greater certainty that the relief will remain available as companies move through their initial loss-making and low-profit years.

The measure is an extension rather than a redesign of the relief. It does not introduce any enhancements aimed at challenges such as scaling, globalisation or access to talent. For SMEs and high-potential start-ups, continuity is positive, but future Budgets may need to consider whether the regime meets the needs of businesses as they scale.

Corporation tax is one element of the wider cost of building a business, and further measures to address such costs, including payroll, technology, financing and compliance, would be welcome.

Incremental easing of capital acquisitions tax

The Bill increases the capital acquisitions tax group thresholds that are used to determine when gifts and inheritances fall into charge. The new thresholds apply to gifts and inheritances taken on or after 7 October 2026:

Group A: €400,000 to €420,000
Group B: €40,000 to €44,000
Group C: €20,000 to €22,000

For family and owner-managed businesses, these changes provide an incremental easing of succession tax.

Together with existing business and agricultural reliefs, the higher thresholds can reduce the tax implications associated with generational transition, although the increases are modest relative to the value of many established businesses.

Modernising preference-share rules

The Bill also modernises references to preference shares in various provisions of the Taxes Acts, where preference shares are used as a comparative for the taxpayer company shares.

As there are currently no comparable benchmark preference shares quoted in the State, the Bill provides for the amendment of the current definition so that, from 1 January 2027, a fixed-dividend share admitted to trading on a regulated market in an EEA state can be used as the benchmark.

This should allow the relevant provisions to continue operating as intended for private Irish businesses that use preference shares within their capital structures.

This is a technical adjustment, but it is a sensible update to the corporate tax code and keeps the rules workable in an EEA market context.

What private businesses should take from the Bill

For private Irish businesses, Finance Bill 2026 is best viewed as a collection of practical adjustments rather than a major reset.

The preliminary tax changes should offer the most immediate administrative and cash-flow benefits, while the capital gains tax reduction, higher capital acquisitions tax thresholds and extension of start-up relief provide more targeted support for investment, entrepreneurship and succession.

Get in touch

The measures unveiled in Finance (No.2) Bill 2026 will have far-reaching implications for businesses across Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.

Contact Caoimhe McLoughlin of our Tax team today.