Budget 2026: Extends VAT Cut on Energy But Axes Universal Electricity Credits

Budget 2026: What Was Announced?

Reduced VAT Rate Extension on Energy

The reduced 9% VAT rate on gas and electricity bills extends through December 31, 2030, preventing reversion to the standard 13.5%.

No Universal Energy Credits

A notable absence from this year's Budget is the introduction of the broad, one-off electricity credits for all households that were a feature of previous Budgets.

Targeted Energy and Heating Supports

Fuel Allowance:

• Weekly rate increases by €5
• Extended to Working Family Payment (WFP) recipients beginning March 2026 (backdated)

Microgeneration Relief:

Income tax exemption on €400 annual microgeneration income extended to end of 2028.

Retrofitting and SEAI Programmes:

Social housing retrofitting funding increased from €90 million to €140 million.

Energy Infrastructure Investment

€3.5 billion allocated to ESB and EirGrid for grid strengthening and renewable energy acceleration.

Carbon Tax

Increases to €71 per tonne CO2:

• Auto fuels: effective December 8, 2025
• Home heating fuels: effective May 1, 2026

Extension of Reduced Energy VAT Rate

The 9% discounted rate, originally a temporary anti-inflation measure, now extends until December 31, 2030. Without this, the standard 13.5% rate would apply, significantly raising annual energy bills.

End of Universal Electricity Credits Sparks Concern

Previous budgets (2023-2024) provided universal credits worth hundreds of euros collectively. The removal marks a clear shift in fiscal strategy, moving away from broad-based handouts. Critics argue this risks increased energy poverty, particularly for households with existing bill arrears.

Targeted Support and Fuel Allowance Enhancements

Two primary measures:

1. €5 weekly Fuel Allowance increase
2. Expanded eligibility to Working Family Payment recipients (March 2026, backdated)

This addresses energy poverty among low-income working families who were previously excluded.

Climate Action and Infrastructure Investment

Estimates based on 11,000 kWh annual gas consumption; 900-litre oil tank.

What Can I Do About Increasing Electricity Prices?