The February payroll will surprise many taxpayers. For earnings under 35,200 euros per year (roughly 2,500 euros monthly across 14 payments), there is good news. It does not boost salary directly, yet the tax system adjusts how personal income tax is calculated, which can add up to about 1,000 euros extra in take home pay each year.
This tax reform will touch about eight out of ten workers by providing a deduction on income taxed at annual rates below 35,200 euros. In practice, those earning under 15,000 euros per year will pay less tax, with the prior threshold near 14,000 euros. For earnings up to 21,000 euros in a year, the change reduces withholding for many workers, while wages between 21,000 and 35,200 euros will see a lower amount withheld at source. It is important to note that this is a withholding adjustment rather than a direct reduction in overall tax due, and the effect varies by individual circumstances.
These are the IRPF changes that will affect payrolls.
Under this regulation, the tax authority updates the 2023 withholding table for the current year. The first change is that the income thresholds at which withholding is not applied are raised. For example, a single person with dependents will see the non taxable slice rise from 15,947 euros to 17,270 euros, meaning more income falls below the tax threshold and does not require a refund from the Treasury.
Treasury introduces a solidarity levy on large fortunes
Second, the maximum withholding threshold can be claimed only if specific personal and family criteria are met. For instance, a married taxpayer whose spouse earns less than 1,500 euros annually may qualify for reduced withholding under the new rules.
MEI: lighter tax on payroll
Take this example: a married taxpayer with an annual income of 22,001 euros and two children will have a withholding of 1,186.57 euros under the new thresholds, compared with 2,303.22 euros under the old rules. The aim of the reform is to prevent abrupt rises in withholding as income edges above certain levels.
It is clear that personal income tax is a layered concept influenced by family status, place of residence, and eligible deductions. This complexity can make the full scope hard to grasp.
What is the solidarity tax and who does it affect
Sometimes withholding taxes are very low, and taxpayers may owe the Treasury at tax time. The plan to adjust withholding will be phased in during the first quarter of 2024, effectively shifting the payment schedule. In any case, taxpayers who wish can ask their employer to apply withholding assumptions they believe are most appropriate, though they may still owe a balance later on.
Specific guidance notes that the shift aims to smooth out the tax payable throughout the year and avoid large year-end adjustments [CITATION NEEDED].