The new year brings good news for Portuguese families, with the State Budget for 2025 foreseeing a set of measures that will reduce the tax burden, from changes in Income Tax to the elimination of tolls on some highways. These changes represent a significant relief in families’ monthly and annual expenses.
IRS update: Less taxes, more income
One of the measures with the greatest impact will be the updating of tax brackets by 4.6%, which will allow inflation to be kept up and the tax burden alleviated for workers and pensioners. This adjustment will exempt annual gross income of up to 8,057 euros from tax, an increase from the current limit of 7,703 euros.
Furthermore, the subsistence minimum – income exempt from taxation – will rise to 12,180 euros, reflecting the increase in the minimum wage to 870 euros in 2025. For a single worker, savings can exceed 300 euros annually, while a couple without children you could save up to 600 euros, according to expert simulations.
Another relevant change is the increase in the ceiling for the deduction of rent for own and permanent homes, which rises from R$600 to R$700 annually. This measure, approved by Parliament, will come into force on January 1, 2025.
IRS Jovem: Greater exemption and more coverage
Young workers will also benefit greatly. The Youth Income Tax regime, which grants partial or total tax exemption, will be extended from five to ten years and will no longer require graduation as a condition. The income limit to benefit from the scheme will rise to 28,737 euros per year, equivalent to around 2,000 euros gross per month.
At the peak of application of this regime, the exemptions can represent an annual benefit of up to 2,700 euros, providing significant relief for those starting active life.
Reduction of VAT on electricity and essential goods
Your electricity bill will also be lighter. From January 1st, the ICMS applied to the first 200 to 300 kWh per month will be reduced from 23% to 6%, covering 3.4 million consumers with contracted powers of up to 6.90 kVA. Large families, with five or more members, will be able to consume up to 300 kWh per month at the minimum rate.
This relief on electricity can translate into monthly savings of between 1.50 and 3.82 euros, depending on consumption and the household.
In addition, infant food will also have a reduced VAT rate of 6%, a measure approved unanimously in Parliament. This adjustment alleviates costs for families with young children at a time when the prices of essential items have been a constant concern.
End of tolls on selected motorways
For those who live or travel in the interior and Algarve, another important measure is the elimination of tolls on seven ex-SCUT motorways, including the A22 in the Algarve and the A23 in Beira Interior. This decision, approved in Parliament, will represent direct savings for users of these roads.
However, the remaining motorways in the country will see a 2.21% increase in tolls, reflecting inflation and agreements previously established with concessionaires.
Global impact of measures
The tax changes for 2025 promise to alleviate the expenses of thousands of Portuguese families. The combination of updating IRS bands, reducing VAT on essential goods and electricity, and eliminating tolls on strategic highways is an important step towards increasing disposable income.
Despite the benefits for taxpayers, these measures will have a significant impact on public accounts. Reducing VAT on electricity, for example, will cost the State around 110 million euros, while the elimination of tolls will represent an estimated loss of revenue of 180 million euros. It remains to be seen how these changes will be balanced in the government’s budget in the long term.
With this package of measures, the year 2025 promises to be lighter for the Portuguese, bringing not only financial relief, but also a boost to quality of life.
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