The Morning Lead

The price of a packet of cigarettes increased at midnight, as did the price of diesel and petrol.

WHILE LAST YEAR’S pre-election Budget was widely described as a giveaway, this year’s was anything but.

Finance Minister Paschal Donohoe increased overall government spending by €9.4 billion – but the bulk of it won’t be going into people’s pockets. 

The spending breakdown is €8.1 billion allocated for public spending and €1.3 billion for cuts to taxation. 

Some measures have already entered force.

Here are the new measures that have already kicked in:

The rate of carbon tax on petrol and diesel has increased from €63.50 to €71 per tonne of CO2 emitted.

The changes will add between 2-3 cents to a litre of diesel and petrol Alamy Stock Photo Alamy Stock Photo

This increase will also apply to all other fuels – such as home heating oil – from 1 May 2026.

Under legislation agreed in 2020, carbon tax increases by a certain amount every year and it’s set to hit €100 per tonne of CO2 in 2030.

Revenues are ringfenced for climate measures and for addressing fuel poverty, while the tax itself is intended to act as an incentive to switch to cleaner fuels, with a view to making progress towards Ireland’s climate targets.

The annual increases apply to auto-fuels in October (at Budget time) and to all other fuels (including heating fuels) the following May, when the heating season is over.

Industry lobby group Fuels for Ireland said the carbon tax increase means that motorists can expect to pay about 2.5 cents more per litre on petrol and diesel.

Fuels for Ireland added that changes to the state’s rules on blending renewable biofuels into petrol and diesel will add a further 2-3 cents per litre.

Another change which kicked in from midnight was an increase to the price of a packet of 20 cigarettes, rising by 50c to €18.55.

The standard increase in recent Budgets has typically been 50c, though last year the hike was €1.

The price of a packet of 20 cigarettes is now €18.55. Alamy Stock Photo Alamy Stock Photo

Separately, a new tax on vape liquid announced in last year’s Budget will take effect from 1 November.

Donohoe confirmed in September that the tax would be applied at a flat rate of 50c per millilitre of e-liquid. 

For example, a standard Lost Mary or Elf Bar disposable vape holds 2ml of liquid, meaning its price will rise by €1, excluding VAT. 

Elsewhere, midnight marked the beginning of a period of reduced VAT on the sale of new apartments. This VAT cut from 13.5% to 9% will apply until 31 December 2030.

Donohoe said this reduction will help address the “viability gap” in apartment construction and that it is part of a policy to deliver more and higher density apartments.

However, Labour’s housing spokesperson Conor Sheehan said that the Government is “choosing to forgo €390m annually to give developers a VAT cut on apartments, with no strings attached”.

Extensions

A number of schemes were also extended in yesterday’s Budget, including some that were due to expire this year.

The reduced VAT rate of 9% on gas and electricity bills was due to expire on 1 November and has been extended until 31 December 2030.

Alamy Stock Photo Alamy Stock Photo

The reduced rate of Universal Social Charge for medical card holders has also been extended until 31 December 2027, while the Back to School Clothing and Footwear Allowance will now include children aged 2 and 3 years old.

Meanwhile, the vehicle registration tax (VRT) relief of €5,000 for electric vehicles has been extended for another year until 31 December 2026.

The Rent Tax Credit has also been extended to 2028.

The credit, for people paying for private rented accommodation, was due to end this year – it remains at the current level of 20% of rent payments in the year, up to a maximum credit of €1,000 for an individual or €2,000 for a couple who are jointly assessed for tax.

The Mortgage Interest Tax Credit has also been extended into next year.

It is available on the increased interest paid on mortgages in 2025 and 2026 compared with the amount paid in 2022.

The Mortgage Interest Tax Credit will be reduced to a maximum tax credit of €625 per property next year Alamy Stock Photo Alamy Stock Photo

The current tax relief on the increase is 20% and is capped at €1,250 per property.

This will be reduced to a maximum tax credit of €625 per property for 2026.

Measures to kick in later

The Fuel Allowance season normally runs from late September to April and this payment has been upped by €5 per week to €38.

A range of social protection payments will also increase from January 2026.

The maximum rate of most weekly social welfare payments will increase by €10, with proportional increases for qualified adults and people on reduced rates of payment.

Elsewhere, the Domiciliary Care allowance will increase by €20, from €360 to €380 per month.

The Working Family Payment income limits will also increase by €60 a week for all family sizes.

The Child Support Payment weekly rate will also increase from €50 to €58, for children under 12 years, and from €62 to €78 for children aged 12 and over.

Meanwhile, a double Christmas Bonus will be paid to people getting long-term social welfare payments, such as those on a Carer’s Allowance, Disability Allowance, or Jobseeker’s Allowance.

The national minimum wage will also increase by 65 cents to €14.15 per hour from 1 January, while the ceiling for the 2% Universal Social Charge band will increase by €1,318 to €28,700 in line with the increase in the national minimum wage.