Ireland’s 2026 Budget brought encouraging news for companies investing in innovation. With global markets facing uncertainty and increasing competition for research funding, the Government’s latest updates to the Research and Development (R&D) Tax Credit aim to strengthen Ireland’s position as a leader in innovation and technology. Here’s a look at what’s changed and what it means for your business.

A Higher Rate of Relief

From 1 January 2026, the R&D tax credit rate will increase from 30 % to 35 %. This change marks a significant step forward and sends a clear message that Ireland remains an attractive location for research and development activities.

The higher rate will appeal to both multinational and Irish-owned companies deciding where to locate their R&D operations. For many organisations, that headline figure is a major factor when assessing global investment opportunities.

Beyond competitiveness, the increase offers a meaningful benefit for businesses already carrying out qualifying R&D work — delivering a higher return on investment and improved cash flow to support further innovation.

Faster Access to Refunds

Another key update is the increase in the first-year refund instalment, which rises from €75,000 to €87,500.

This adjustment is designed to give companies, particularly small and medium-sized enterprises (SMEs), faster access to the cash benefit of their R&D tax credit. Under the new rules:

• Companies with claims of up to €87,500 will now receive the full amount in the first year.
• Claims between €87,500 and €175,000 will also benefit from a quicker refund schedule.

This enhancement should provide a welcome boost to cash flow and encourage ongoing investment in innovation, research, and product development.

Simplified Administration for R&D Teams

Budget 2026 also introduced a simplification measure for companies employing dedicated R&D staff.

Where an employee spends at least 95 % of their time on qualifying R&D activities, 100 % of their emoluments can now be included as qualifying expenditure.

Previously, Revenue practice required a small percentage to be excluded to account for administrative or training time. The new measure recognises that R&D professionals often work almost exclusively on research projects and reduces unnecessary administration for companies maintaining time and cost records.

The R&D Compass – What’s Next

While the Budget outlined immediate changes, the Department of Finance also announced plans to publish an “R&D Compass” in the coming weeks.

This report will consider targeted adjustments to the R&D tax credit to better align it with industry practices, particularly in the areas of:

• Outsourcing – reviewing restrictions on outsourcing to connected and unconnected parties.
• Qualifying expenditure – updating definitions to reflect how innovation is carried out today.

The R&D Compass is also expected to explore additional supports, such as an Innovation Tax Credit or Digitalisation Tax Credit, aimed at encouraging investment in areas like sustainability, green technologies, and digital transformation.

What This Means for Irish Businesses

The latest R&D tax-credit changes represent another step forward in Ireland’s commitment to innovation.

For businesses, these updates bring several key advantages:

• Higher value credits through the 35 % rate.
• Improved cash flow thanks to faster refund access.
• Less administration for R&D-focused employees.
• Potential future opportunities through new innovation-focused supports.

Combined, these measures make Ireland an even more competitive and attractive location for research and development — particularly at a time when global businesses are reassessing their R&D strategies.

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