The Government has proposed a reduction in personal income tax (IRS), with simulations showing annual savings ranging from 12.10 euros for a single worker earning 1,000 euros gross per month to 343.66 euros for a couple earning a combined 8,000 euros gross per month.

The new rates will apply to the first six brackets, while the rates already in place will apply to brackets 7 through 9, Executive Digest reports. However, taxpayers in the higher brackets will also benefit from the reductions because IRS is calculated progressively.

Singles

Executive Digest has measured the impact of the IRS reduction compared to current rates using information released on the Government Portal.

A single, childless employee living in mainland Portugal earning a gross monthly income of 1,000 euros will save an additional 12.10 euros this year.

A single, childless employee with a gross salary of 1,500 euros will have an additional annual saving of 65.32 euros.

In the case of a worker who receives 2,000 euros gross per month, the additional tax relief will be 100.44 euros.

With a gross salary of 2,500 euros, the decrease is 133.28 euros, and with a gross salary of 3,500 euros, the income tax reduction is 171.50 euros.

Pensioners

A pensioner who is the sole recipient of income and receives a gross pension of the same value will have reductions equal to those that the Government estimates for single workers without children.

Families

For a couple with two children, where both parents are employed, the impact is different from what is projected for single workers and pensioners, given the specific characteristics of the family unit.

In a circumstance where both parents have an equal income of 1,000 euros gross per month, and where the income tax return is filed jointly, the changes proposed by the Government do not change the tax situation, because taxpayers already do not pay IRS.

For this specific group, “the income tax collection resulting from the application of the rates in the State Budget for 2026 was already equal to zero,” information on the Government Portal explains.

Couples

In a couple where one earns 1,500 euros gross per month and the other receives 1,300 euros, the decrease will be 116.64 euros compared to the current taxation level.

If one member of the couple receives 2,500 euros gross and the other earns 1,500 euros, the additional annual relief will be 200.88 euros.

If one person’s gross salary is 3,700 euros and the partner’s is 2,000 euros, the reduction in annual income tax will be 292.62 euros.

In a case where one member of the couple earns 5,000 euros and the other earns 3,000 euros, the decrease compared to the current income tax will be 343.66 euros.

The government’s simulations assume that income tax rates will decrease between 0.3 and 0.5 percentage points up to the 6th income bracket, according to the bill that the executive will present to parliament.

Decrease for each tax bracket

According to information published on the Government Portal, the rate for the 1st bracket decreases by 0.3 percentage points; the 2nd, 4th and 5th brackets decrease by 0.5 percentage points; the 3rd bracket decreases by 1 percentage point; while in the 6th bracket there is a reduction of 0.3 percentage points, Executive Digest reports.

The rate for the first tax bracket will decrease from 12.50 percent to 12.20 percent; the rate for the second drops from 15.70 percent to 15.20 percent; the rate for the 3rd drops from 21.20 percent to 20.20 percent; the rate for the 4th drops from 24.10 percent to 23.60 percent; the rate for the 5th drops from 31.10 percent to 30.60 percent; and the 6th drops from 34.90 percent to 34.60 percent.

For the 7th bracket, the rate remains the same at 43.10 percent; the 8th at 44.60 percent; and the 9th at 48.00 percent.

Despite rates remaining unchanged for the 7th, 8th and 9th brackets, taxpayers in these brackets will also benefit because IRS is calculated progressively, meaning portions of their income are taxed under the lower brackets.

Prime Minister Luís Montenegro confirmed that the reduction will be reflected in November withholding tax and the Christmas bonus.