I run a small hairdressing business. Will I be better off after Budget 2026?

Budget 2026 included certain measures aimed at supporting the food and catering and hairdressing sectors. One of the most headline-grabbing announcements is the VAT reduction. From July 2026, the VAT rate for food and catering businesses and hairdressing services will be cut from 13.5% to 9%.

On the surface, this is great news and should provide a welcome boost to your business.

However, the VAT rate reduction does not come into effect until July 2026, this is still 9 months away so there is no immediate positive impact. There are other changes that you’ll need to factor in when planning for the year ahead.

 

Wage Increases from January 2026

From 01 January 2026, the national minimum wage will increase to €14.15 per hour (that’s an increase of €0.65 per hour).

If you employ five staff members on minimum wage working 39 hours per week, your monthly wage bill (including Employers' PRSI) will rise from around €12,700 to €13,300 per month. These increases take effect six months before the VAT cut is introduced, so it will impact your costs in the short term.

 

Pension Auto-Enrolment Starts

Another significant change is the introduction of auto-enrolment. From January 2026, employers will be required to contribute 1.5% of each employee’s salary to the scheme.

For a business with five minimum-wage employees, this will add approximately €180 per month, bringing your total monthly cost to around €13,480.

 

Overall Impact

Taking these factors together, your total monthly staffing costs are set to increase by roughly 6.2% from January 2026. While the VAT reduction in July will provide some relief, it’s important not to rely on this alone when budgeting for the year ahead.

Planning early and reviewing cash flow will help you manage these increases and keep your business on a steady footing.

 

Published 9 Oct 2025

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