The Government has proposed a further reduction in the standard Personal Income Tax rates applicable to the first six income brackets.<\/p>\n
The reduction varies between 0.3 and 0.5 percentage points:<\/p>\n
The income thresholds for the brackets remain unchanged. The amendment therefore concerns the applicable tax rates<\/strong>, rather than the income thresholds determining each bracket.<\/p>\n One of the most important issues for companies is the distinction between standard Personal Income Tax rates<\/strong> and withholding tax rates<\/strong>.<\/p>\n The table above sets out the standard rates used when determining the annual tax liability.<\/p>\n Withholding tax is calculated using specific tables that take into account different family and remuneration circumstances.<\/p>\n For 2026, for example, there are different withholding tables for:<\/p>\n The current withholding tables were approved by Order No. 233-A\/2026 and are in force for 2026.<\/p>\n For November and December, new withholding tables will be required<\/strong> to incorporate the Personal Income Tax reduction and its retroactive effect.<\/p>\n The Government’s announced intention is for the reduction to be reflected in withholding tax from November 2026 onwards<\/strong>.<\/p>\n This means that employees should begin to see the effect of the change in their net pay towards the end of the year.<\/p>\n The reduction in withholding will also act as an adjustment mechanism to compensate for the withholding tax applied between January and October under the previous tables.<\/p>\n This should allow the effect of the tax reduction, with retroactive effect from January, to be reflected during 2026.<\/p>\n The Christmas bonus will also be relevant to this process.<\/p>\n Since the Personal Income Tax reduction is expected to be reflected in the new withholding tables applicable from November onwards, the Christmas bonus will have to be processed in accordance with the rules and tables officially published.<\/p>\n For many companies, this will be one of the most important payroll processes of the year, making the correct configuration of payroll software particularly important.<\/p>\n The standard rates applicable to the three highest brackets will remain unchanged.<\/p>\n However, this does not necessarily mean that taxpayers falling within these brackets will receive no benefit from the changes<\/strong>.<\/p>\n Portugal operates a progressive Personal Income Tax system. Taxable income is divided into brackets, with each portion taxed at the corresponding rate.<\/p>\n Therefore, when the rates applicable to the first six brackets are reduced, taxpayers whose taxable income exceeds the 6th bracket may also be affected in respect of the portion of their income subject to the reduced rates.<\/p>\n The actual impact will depend on each taxpayer’s individual circumstances.<\/p>\n According to simulations released by the Government, a single employee without children, resident in mainland Portugal, could see an estimated annual reduction in Personal Income Tax of approximately:<\/p>\n These figures are simulations and do not necessarily represent the monthly increase in net salary<\/strong>, since the impact of withholding depends on the employee’s family circumstances and other factors taken into account in the calculation.<\/p>\n This distinction is important.<\/p>\n When, for example, the rate for the 3rd income bracket falls from 21.20% to 20.70%, this represents a reduction of 0.5 percentage points<\/strong>, rather than 0.5%.<\/p>\n Therefore:<\/p>\n The change will have a direct impact on accounting, human resources and payroll departments.<\/p>\n Companies should prepare to:<\/p>\n Once the new withholding tables are published, they should be correctly configured in the payroll software used by the company.<\/p>\n The information affecting withholding should be checked, particularly:<\/p>\n November is expected to be the first month in which the new tables will apply.<\/p>\n The Christmas bonus should be processed in accordance with the specific rules that are published.<\/p>\n After payroll processing, companies should check that the amounts withheld correspond to the new rules.<\/p>\n Amounts withheld must continue to be correctly reported and paid within the applicable statutory deadlines.<\/p>\n One of the most relevant aspects of the measure is its retroactive effect.<\/p>\n The proposal provides for the new rates to apply to income earned during 2026, even though the amendment will take effect during the final quarter of the year.<\/p>\n Consequently, it will be necessary to compensate for the difference between the withholding tax applied during the first months of the year and the amounts that would have resulted from applying the new rates throughout the year.<\/p>\n The new withholding tables are expected to provide the mechanism for making this adjustment during the final months of the year.<\/p>\n This is a particularly important issue for companies.<\/p>\n The new standard Personal Income Tax rates are already known, but the new monthly withholding tables for November and December have not yet been published.<\/strong><\/p>\n The bill amending the tax rates was submitted by the Government to the Portuguese Parliament on 21 September 2026. Until the legislation is approved and subsequently published, the rates currently established under the applicable legal framework remain in force.<\/p>\n Companies should therefore not anticipate the precise withholding amounts based solely on the table of standard Personal Income Tax rates.<\/p>\n It will be necessary to wait for the publication of the official withholding tax tables<\/strong>.<\/p>\n 2026 will be marked by a further reduction in Personal Income Tax in Portugal.<\/p>\n The proposal provides for reductions in the standard rates applicable to the 1st to 6th income brackets, which will become 12.20%, 15.20%, 20.70%, 23.60%, 30.60% and 34.60%<\/strong>, respectively. The rates applicable to the three highest brackets remain unchanged.<\/p>\n The measure will apply to income earned throughout 2026 and is expected to be reflected in withholding tax from November onwards.<\/p>\n For employees and pensioners, the main impact will be felt in the net amount received during the final months of the year.<\/p>\n For companies, the key challenge will be ensuring a smooth transition between the current withholding tables and the new tables, including the processing of the Christmas bonus.<\/p>\n It is important, however, to distinguish between the new standard Personal Income Tax rates and the withholding tax tables: the latter still need to be officially published for November and December 2026.<\/strong><\/p>\nNew Personal Income Tax rates for 2026<\/h2>\n
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\n Bracket<\/strong><\/td>\n Annual taxable income<\/strong><\/td>\n Current rate<\/strong><\/td>\n New proposed rate<\/strong><\/td>\n Reduction<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n \n 1st<\/td>\n Up to \u20ac8,342<\/td>\n 12.50%<\/td>\n 12.20%<\/strong><\/td>\n -0.30 p.p.<\/td>\n<\/tr>\n \n 2nd<\/td>\n > \u20ac8,342 to \u20ac12,587<\/td>\n 15.70%<\/td>\n 15.20%<\/strong><\/td>\n -0.50 p.p.<\/td>\n<\/tr>\n \n 3rd<\/td>\n > \u20ac12,587 to \u20ac17,838<\/td>\n 21.20%<\/td>\n 20.70%<\/strong><\/td>\n -0.50 p.p.<\/td>\n<\/tr>\n \n 4th<\/td>\n > \u20ac17,838 to \u20ac23,089<\/td>\n 24.10%<\/td>\n 23.60%<\/strong><\/td>\n -0.50 p.p.<\/td>\n<\/tr>\n \n 5th<\/td>\n > \u20ac23,089 to \u20ac29,397<\/td>\n 31.10%<\/td>\n 30.60%<\/strong><\/td>\n -0.50 p.p.<\/td>\n<\/tr>\n \n 6th<\/td>\n > \u20ac29,397 to \u20ac43,090<\/td>\n 34.90%<\/td>\n 34.60%<\/strong><\/td>\n -0.30 p.p.<\/td>\n<\/tr>\n \n 7th<\/td>\n > \u20ac43,090 to \u20ac46,566<\/td>\n 43.10%<\/td>\n 43.10%<\/strong><\/td>\n \u2014<\/td>\n<\/tr>\n \n 8th<\/td>\n > \u20ac46,566 to \u20ac86,634<\/td>\n 44.60%<\/td>\n 44.60%<\/strong><\/td>\n \u2014<\/td>\n<\/tr>\n \n 9th<\/td>\n Above \u20ac86,634<\/td>\n 48.00%<\/td>\n 48.00%<\/strong><\/td>\n \u2014<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n It is important to distinguish Personal Income Tax rates from withholding tax rates<\/h2>\n
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When will employees start to see the reduction in their salaries?<\/h2>\n
What happens to the Christmas bonus?<\/h2>\n
What about employees in the 7th, 8th or 9th income brackets?<\/h2>\n
What could be the impact on employees’ Personal Income Tax?<\/h2>\n
\n\n
\n Gross monthly salary<\/strong><\/td>\n Estimated annual Personal Income Tax reduction<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n \n \u20ac1,000<\/td>\n \u20ac12.10<\/td>\n<\/tr>\n \n \u20ac1,500<\/td>\n \u20ac65.32<\/td>\n<\/tr>\n \n \u20ac2,000<\/td>\n \u20ac100.44<\/td>\n<\/tr>\n \n \u20ac2,500<\/td>\n \u20ac133.28<\/td>\n<\/tr>\n \n \u20ac3,000<\/td>\n \u2014<\/td>\n<\/tr>\n \n \u20ac3,500<\/td>\n \u20ac171.50<\/td>\n<\/tr>\n \n \u20ac4,000<\/td>\n approximately \u20ac172<\/td>\n<\/tr>\n \n \u20ac5,000<\/td>\n approximately \u20ac172<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Is the reduction 0.5 percentage points or 0.5%?<\/h2>\n
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What should companies do?<\/h2>\n
1. Update payroll software<\/h3>\n
2. Review employee information<\/h3>\n
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3. Prepare the November payroll<\/h3>\n
4. Check the treatment of the Christmas bonus<\/h3>\n
5. Verify the withholding amounts<\/h3>\n
6. Check payments to the Portuguese Tax Administration<\/h3>\n
Retroactive effect from January 2026<\/h2>\n
When will the new withholding tables be published?<\/h2>\n
Conclusion<\/h2>\n
How can Nominaurea<\/a> help?<\/h3>\n