2026 will be marked by a further change to the Personal Income Tax rules in Portugal.<\/p>\n
The withholding tables currently in force were approved at the beginning of the year and apply to employment income and pensions received by residents in Portugal throughout 2026.<\/p>\n
A further Personal Income Tax reduction has subsequently been announced, covering the first six income brackets.<\/p>\n
The objective is for this reduction to take effect during 2026 itself, through new withholding tables applicable from November onwards.<\/p>\n
As a result, salaries and pensions paid in November should already reflect the reduction, including the Christmas bonus.<\/p>\n
Withholding tax is an advance payment of Personal Income Tax, which is subsequently settled through the annual tax assessment.<\/p>\n
Each month, the employer withholds a certain amount from the employee\u2019s salary and pays it to the Portuguese Tax Administration. A similar procedure applies to pension income.<\/p>\n
When withholding rates are reduced, the amount paid to the State each month also decreases and, consequently, the net amount received by the employee or pensioner increases.<\/p>\n
It is important, however, to distinguish between tax withholding and the final tax liability<\/strong>.<\/p>\n A reduction in monthly withholding does not necessarily mean that the annual tax due will decrease by exactly the same amount. The final Personal Income Tax liability will be determined through the annual tax assessment, taking into account total income, tax deductions and other relevant circumstances.<\/p>\n The announced measure provides for a further reduction in Personal Income Tax rates covering the first six income brackets.<\/p>\n The general Personal Income Tax rates currently applicable for 2026 range from 12.5% to 48% across the nine income brackets.<\/p>\n The new measures will modify the rates applicable to the first six brackets.<\/p>\n However, at the time of publication of this article, the new withholding tables and their specific percentages have not yet been published<\/strong>. Therefore, it is not yet possible to determine precisely how much an individual employee\u2019s net salary will increase.<\/p>\n Nor will all taxpayers necessarily benefit by the same amount. The impact will depend, among other factors, on salary level, marital status, number of dependants and other relevant tax circumstances.<\/p>\n Although the announced reduction directly concerns the first six income brackets, Portugal operates a progressive Personal Income Tax system.<\/p>\n This means that taxpayers whose income reaches higher brackets may also be affected by the change, since part of their taxable income is subject to the rates applicable to the lower brackets.<\/p>\n The measure should therefore not simply be understood as a change benefiting exclusively taxpayers within the first six brackets.<\/p>\n One of the main practical consequences will be reflected in November payroll.<\/p>\n Companies will have to apply the new withholding tables to salaries paid from that month onwards, in accordance with the rules officially published.<\/p>\n For employees, this may result in an increase in their net salary.<\/p>\n For example, if an employee currently has a certain amount withheld each month, the application of the new table may reduce that amount. The difference will then be reflected in the employee\u2019s net pay.<\/p>\n The exact calculation will nevertheless depend on the new withholding tables and the individual circumstances of each employee.<\/p>\n The Christmas bonus will also be covered by the change.<\/p>\n This is particularly relevant because the Christmas bonus represents a significant part of the annual income received by many employees.<\/p>\n The reduction in withholding rates applicable from November will also need to be taken into account when processing the Christmas bonus, in accordance with the specific rules that will be established.<\/p>\n As a result, the net amount received towards the end of 2026 may reflect both the change in withholding applied to the monthly salary and the withholding applicable to the Christmas bonus.<\/p>\n Another important aspect of the measure is that the Personal Income Tax reduction will have retroactive effect from January 2026.<\/p>\n During most of the year, withholding will have been calculated using the previously applicable tables. The difference therefore needs to be reflected during the final months of the year.<\/p>\n The new withholding tables will play an important role in this adjustment process.<\/p>\n By changing the rates during the final months of the year, the necessary adjustment will be made to bring the total amount withheld during 2026 into line with the new tax framework.<\/p>\n The precise adjustment mechanism will depend on the rules that are formally approved and published.<\/p>\n For companies, this change is not simply a matter of employees receiving a higher net salary.<\/p>\n It also represents an operational change to payroll processing.<\/p>\n Companies and paying entities will need to:<\/p>\n Incorrect payroll configuration may result in differences between the amount actually withheld from an employee and the amount that should have been withheld, potentially requiring subsequent corrections.<\/p>\n The change to the withholding tables in November means that 2026 may end with two different withholding regimes within the same tax year.<\/p>\n Until October, the tables currently in force will apply.<\/p>\n From November onwards, the new tables will apply, reflecting the additional Personal Income Tax reduction.<\/p>\n This situation requires particular attention from human resources, accounting and payroll departments, especially in companies with a large number of employees or with different family and salary circumstances.<\/p>\n It will also be important to ensure that the payroll software used by the company is updated correctly and on time.<\/p>\n The changes do not only affect employees.<\/p>\n The reduction in withholding should also be reflected in pensions paid from November onwards through the new tables applicable to pensioners.<\/p>\n At the same time, an extraordinary supplement for certain pensioners has been announced, to be paid in December. This is a separate measure from the Personal Income Tax reduction.<\/p>\n It is therefore important not to confuse the two measures: the reduction in Personal Income Tax withholding and the extraordinary pension supplement are separate mechanisms with different rules<\/strong>.<\/p>\n This will probably be one of the most frequently asked questions by employees.<\/p>\n At present, there is not yet sufficient official information to calculate the exact amount for each individual situation.<\/p>\n The announced Personal Income Tax reduction will have a significant overall impact on tax revenue, but the precise reduction in each rate and how it will be distributed across the different income brackets will have to be established through the relevant legislation and official withholding tables.<\/p>\n For this reason, any calculation made before the publication of the new tables should be regarded as indicative only.<\/p>\n The final amount will depend on the new withholding table and each taxpayer\u2019s specific circumstances.<\/p>\n Although the final withholding tables are not yet available, companies can already start preparing.<\/p>\n It is advisable to:<\/p>\n The changes can only be implemented correctly once the official rates and application rules are known.<\/p>\n The payroll system used by the company should be ready to incorporate the new tables.<\/p>\n Marital status, number of dependants and other relevant information should be correctly recorded in the payroll system.<\/p>\n November will be the first month in which the new rules are expected to apply, making it important to avoid last-minute changes.<\/p>\n The processing of the Christmas bonus should be reviewed in accordance with the new applicable rules.<\/p>\n After payroll processing, companies should verify the amounts withheld and their corresponding payment to the Portuguese Tax Administration.<\/p>\n Personal Income Tax withholding in Portugal will undergo a further change during the final months of 2026.<\/p>\n The announced reduction covering the first six income brackets will begin to be reflected in salaries and pensions from November and will also affect the Christmas bonus. The measure will have retroactive effect from January 2026, meaning that the new withholding tables will need to incorporate an adjustment mechanism for the amounts withheld throughout the year.<\/p>\n For employees, the main practical consequence may be an increase in the net amount received during the final months of the year.<\/p>\n For companies, the change requires particular attention to payroll processing, the updating of withholding tables and the correct implementation of the new rules.<\/p>\n Until the new official withholding tables are published, it is not possible to determine precisely the individual impact on each employee\u2019s net salary.<\/strong><\/p>\nThe reduction extends up to the sixth income bracket<\/h2>\n
What about taxpayers above the sixth bracket?<\/h2>\n
The impact on November salaries<\/h2>\n
What about the Christmas bonus?<\/h2>\n
Retroactive effect from January 2026<\/h2>\n
What changes for companies?<\/h2>\n
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An important change for year-end payroll processing<\/h2>\n
What about pensioners?<\/h2>\n
How much will net salaries increase?<\/h2>\n
What can companies do now?<\/h2>\n
1. Monitor the publication of the new withholding tables<\/h3>\n
2. Confirm that payroll software will be updated<\/h3>\n
3. Review employee information<\/h3>\n
4. Prepare for November payroll<\/h3>\n
5. Pay particular attention to the Christmas bonus<\/h3>\n
6. Check the withholding amounts<\/h3>\n
Conclusion<\/h2>\n
How can Nominaurea<\/a> help?<\/h3>\n