With the entry into force of the State Budget for 2025 (OE2025), several changes to the IRS promise to impact the net income of workers and pensioners. From updating the brackets to expanding regimes such as IRS Jovem, these measures reflect a government effort to adapt the tax burden to current economic realities. Here are the main changes to the IRS for 2025.
Update of IRS levels
The limits of the nine taxable income brackets will be updated in 4,6%allowing salary increases up to this amount not to imply an increase in tax. This adjustment reflects adaptation to inflation and ensures that a greater proportion of income is subject to lower rates.
IRS Jovem: more comprehensive and with new rules
O IRS Younga regime that grants partial tax exemption to workers up to 35 years of age, brings significant new features:
- The benefit increases from 5 to 10 years;
- All young people up to 35 years old will now be able to benefit, regardless of their level of education or study cycle;
- The exempt income limit rises to 28 thousand euros per year (55 times the value of the IAS, which will be 522.5 euros in 2025).
The regime provides for progressive exemptions:
- 100% in the 1st year obtaining income;
- 75% from 2nd to 4th year;
- 50% from 5th to 7th year;
- 25% in the last three years.
Increase in specific deduction
The specific deduction, frozen for years, was updated in 2024 and will be adjusted again in 2025. It will be equivalent to 8.54 times the IASincreasing the amount exempt from taxation for pensioners and workers. Self-employed workers will also benefit from this change, as the portion of income without the need to prove expenses will be increased.
Reduction in retention of “green receipts”
The withholding tax rate for self-employed workers will be reduced by 25% to 23%reducing the immediate tax burden on these professionals.
Exemption from the national minimum wage (SMN)
The minimum of existence will accompany the rise of the national minimum wage (SMN)which will be 870 euros monthly (12,180 euros annually). Anyone earning up to this amount will continue to be exempt from income tax, protecting lower incomes.
Adjustments to meal vouchers
The value exempt from IRS and Social Security contributions of the meal allowance paid by card will rise to 10,20 euros per day, while the amount paid in cash remains unchanged six euros.
Retention in overtime work
The amounts related to overtime work will have a withholding tax equivalent to 50% of the worker’s monthly salary withholding rate. Previously, this rule was only applied from the 101st overtime hourbut will be valid for all additional hours.
Exempt productivity premiums
Productivity, performance or profit awards, up to an amount equivalent to 6% of base paywill be exempt from IRPF and Single Social Tax (), as long as the company meets specific conditions, such as minimum wage increases of 4,7% for workers who earn amounts equal to or less than the company’s basic remuneration.
New withholding tax tables
The withholding tax tables will be adjusted to reflect the changes introduced in OE2025, such as the update of brackets and deductions. This adjustment aims to ensure that the changes are felt throughout the year and not just in the final adjustment, when submitting the annual income declaration.
Impact on disposable income
The changes to the IRS for 2025 promise an increase in disposable income for the majority of workers and pensioners. Updating the levels, in particular, is a measure that directly benefits those who have had salary increases in line with inflation, avoiding unnecessary tax penalties.
These changes reflect a continuous effort to adapt the tax system to taxpayers’ needs, promoting greater equity and tax relief. However, the exact impact of these measures will depend on the specific situation of each taxpayer, reinforcing the importance of careful analysis when completing the annual income declaration.
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