Reform of how interest is taxed: where it stands after Budget 2027

The Government is reforming the rules on tax relief for interest in phases. Budget 2027 brings first targeted changes for borrowing to lend or invest.

Whether interest on borrowing can be deducted for tax, and how interest received is taxed, is governed in Ireland by rules built up over decades. Responses to a 2024 public consultation pointed to a need for fundamental reform of the framework for taxing interest and allowing deductions for it. The Department of Finance is now working through that reform in stages.

The timeline so far

The aims

The Government says the reform is meant to simplify the regime, support competitiveness and give a stable basis for investment, at home and from abroad. It should also protect the tax base and keep the corporation tax treatment of interest fair and sustainable. Simpler rules should also mean less administration and more certainty for businesses.

What Budget 2027 does

The Minister for Finance said in his Budget statement that Finance (No. 2) Bill 2026 will include several targeted changes. They will simplify the existing rules on interest relief for borrowing used for certain lending and investment activities. The detail will be in the Bill as published, and the changes take effect only when it is enacted.

What it means for you

• Most individuals and small businesses won't notice a change: interest on a business loan used for trading is deducted from profits as before.
• Holding companies, investment structures and businesses that borrow to lend to or invest in other companies should watch the Finance Bill closely. They should review their financing before the changes start.
• Further phases may change the rules more widely, so long-term financing plans should allow for that.

Work it out

• Corporation tax for your company →

Sources

• Department of Finance: Budget 2027: Tax Policy Changes (checked 25/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.