Threshold for higher rate of income tax should be higher, Deloitte says

The recommendation is made to Finance Minister Simon Harris as a way to address the “disproportionate” tax burden on middle-income earners.

The current cut-off point is €44,000, which means all income above that amount is taxed at the higher rate of 40pc. This is a relatively low threshold by international standards.

“Ireland’s top personal income tax rate is among the highest in the EU and despite modest increases to the cut-off point in recent years, increases to the PRSI rates announced in Budget 2026 mean that individuals will pay more in combined tax and social security in 2026 than in 2025,” Deloitte’s submission says.

It points out that average weekly earnings have increased by almost 45pc in the last 10 years, but the standard rate cut-off point (SRCOP) has gone up by only 30pc.

“As a result, the SRCOP is currently less than the average income in Ireland, pushing more individuals into the higher tax bracket,” it says. “We recommend that Budget 2027 set out a clear and phased roadmap to raise the SRCOP to a minimum of €50,000 within the next three years.”

While the Budget is not until October, the Government has been encouraging lobby groups to send in their submissions earlier this year because Ireland is taking up the presidency of the EU in July.

Deloitte also says Mr Harris should consider reforming the personal tax regime so that the combined income tax, Universal Service Charge (USC) and PRSI rate for workers does not exceed 50pc. Currently, some workers can pay a combined marginal tax rate of 52pc on additional income.

Deloitte has joined the calls for a change in how investment products are taxed, as a way to encourage households to seek a higher rate of return on their savings than they are currently getting from deposit interest.

“Simplifying the taxation of investment products is crucial. This could be achieved by introducing universal tax treatment of all investment income at marginal income tax rates, taxing all investment gains at Capital Gains Tax (CGT) rates, providing CGT loss relief across all chargeable investments, and removing the eight-year exit charge for investment funds,” the submission says.

“The current complexity requires taxpayers to navigate various classification systems with differing tax treatments, which is unnecessarily burdensome.”

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Another of its proposals is to reduce CGT to 20pc from the current rate of 33pc, which Deloitte says is one of the highest in Europe, discouraging asset sales and delaying business succession.

Daryl Hanberry, head of tax and legal at Deloitte, said the pre-budget submission is seeking to strike a balance between encouraging domestic investment and FDI, including setting up an easy and economically valuable savings scheme.

“Encouraging investment from within Ireland is crucial for long-term growth and stability,” he said. “Supporting local entrepreneurs, family businesses, and SMEs can drive job creation, innovation, and wealth retention. This is why we call for a reduction in the CGT rate to 20pc to unlock capital, encourage business succession, and boost reinvestment.”