VAT Rate Changes in Ireland 2026: What Businesses Need to Know

Ireland’s VAT rates are shifting in 2026, and the changes reach further than most business owners realise — from hospitality and hairdressing to apartment sales and energy bills. If your business charges or reclaims VAT, understanding exactly which rate applies, and from when, is essential to stay compliant and avoid under- or over-charging customers.

Ireland’s VAT Rates at a Glance

Ireland currently operates five VAT rates:

• 23% standard rate — the default for most goods and services, including electronics, adult clothing, professional fees and fuel at the pump
• 13.5% reduced rate — construction services, hotel accommodation, repairs and short-term car hire
• 9% second reduced rate — gas, electricity, heat pumps, sporting facilities, and (from mid-2026) restaurant food and hairdressing
• 4.8% livestock rate — live cattle, sheep, pigs, goats, deer and certain horses
• 0% zero rate — most basic food, children’s clothing, books, oral medicines and exports

Financial, insurance, medical and educational services remain VAT-exempt, meaning no VAT is charged, but providers also can’t recover VAT on related costs.

What’s Changing in 2026

Budget 2026 introduced several rate changes businesses need to plan for:

• Hospitality and hairdressing: From 1 July 2026, VAT on restaurant and catering services, and on hairdressing, drops from 13.5% to 9% — a one-third cut. Alcohol and soft drinks stay at the 23% standard rate, and hotel accommodation is unaffected, so mixed-supply businesses will need to apply different rates within the same bill.
• Apartments: VAT on completed apartment sales fell from 13.5% to 9%, effective 7 October 2025 through 31 December 2030, aimed at boosting housing supply.
• Energy: The 9% reduced rate on electricity and gas, previously due to expire in October 2025, has been extended to 31 December 2030.
• Standard rate: The general 23% rate is unchanged and still applies to most goods and professional services.

If you operate in any of these sectors, your invoicing and point-of-sale systems need to reflect the correct rate from the exact effective date — applying the wrong rate can mean under-collecting VAT you still owe Revenue, or over-charging customers.

How This Affects VAT Deduction

Rate changes don’t just affect what you charge — they affect what you can reclaim too. Under the general rule, VAT-registered businesses can deduct VAT charged on purchases used for taxable business activity, provided they hold a valid VAT invoice and claim within Revenue’s four-year time limit.

Some costs remain not allowed for deduction regardless of the applicable rate, including petrol (unless stock-in-trade), most passenger vehicles, and staff or client entertainment and accommodation, except in narrow cases like qualifying conference costs. Where a purchase is used for both business and private purposes, only the business-use portion of the VAT is deductible.

Get Ready for the 2026 Changes

With multiple VAT rates now applying across hospitality, construction, energy and general goods, getting the rate — and the deduction — right is more complex than ever. Review your pricing, invoicing systems and VAT3 returns ahead of each effective date to avoid costly corrections later.

Talk to our team today if you’d like help reviewing your VAT position for 2026.