The increase can be explained by the implementation of the new Income Tax tables, which, in practice, give workers a higher monthly income. This relief will be felt more in August and September due to retroactive payments.
Will everyone pay less Income Tax?
With the new tables, the first-tier tax rate increases from 13% to 12.5%, the second-tier tax rate drops from 16.5% to 16%, the third-tier tax rate drops from 22% to 21.5%, the fourth-tier tax rate decreases from 25% to 24.4%, the fifth-tier tax rate decreases from the current 32% to 31.4%, the sixth-tier tax rate drops from 35.5% to 34.9%, the seventh-tier tax rate increases from 43.5% to 43.1%, and, finally, the eighth-tier tax rate drops from 45% to 44.6%.
The rate for the last income bracket remains at 48%.
Although there is no change to this last bracket, the income tax reduction now proposed by the government applies to all taxpayers required to pay taxes, due to the table’s progressive nature. The drop in previous levels also means taxpayers in the new tax bracket will benefit from the tax relief.
In practice, the impact of the changes in 2025 depends on each household’s tax situation, but simulations released by the Ministry of Finance provide some clues.
A couple with two children, both earning €1,500 per month, will see an annual reduction of €165 in their income tax payments compared to the 2025 State Budget, according to simulations by the Ministry of Finance.
A simulation for a couple without dependents predicts annual tax savings, compared to the current rate, of between €67 (when each member earns €1,000 gross per month) and €414 (when each member earns €3,000).
For a single pensioner with no dependents, the annual tax savings compared to the 2025 State Budget range from €34 for a salary of €1,000 to €207 for a salary of €3,000.
Considering a pensioner with a pension of up to €1,000 (gross), the annual tax savings compared to the 2025 State Budget will be €34, rising to €83 for pensions of €1,500, €124 for pensions of €2,000, €166 for pensions of €2,500, and €208 for pensions of €3,000.
On the other hand, PwC simulations reveal that the IRS reduction will allow a single worker without children, with a salary of €1,000, to pay €34 less in annual tax than under the current IRS schedule.