Lisbon, July 22, 2025 (Lusa) - The new personal income tax tables reduce the monthly tax discount until the end of the year and, in August and September, those earning up to €1,136 will receive a full tax exemption, as the rate is 0%.
The Finance Portal published the government order with the new withholding tax tables on Tuesday, informing companies and other entities of the amount they should deduct from salaries and pensions from August onwards.
The order from the Secretary of State for Tax Affairs, Cláudia Reis Duarte, includes tables for two different periods.
Some apply in August and September, with exceptionally lower rates to compensate for the deductions made between January and July, when parliament had not yet approved the personal income tax reduction this month, so the system could not account for it.
Other tables relate to October, November and December, reflecting the final version of the personal income tax. In these three months of the year, the rates are higher than those for August and September, but lower than the current rates.
Employers will have to apply the new rates to August salaries, because the order takes effect on the 1st of that month. However, if they choose not to act, they may “rectify the deductions to be made in the following months” until December, according to the government’s order.
In August and September, the withholding rate will be 0% for gross salaries up to €1,136 for single workers (with or without children) and for workers married to someone who also earns an income.
In the case of workers married to someone with no income, the exemption threshold is lower, covering only salaries up to €1,081 gross.
In the last three months of the year, the 0% rate will only apply up to €870 gross, the minimum wage, as is currently the case. For example, a gross salary of €1,000 previously resulted in an income tax of €58 per month. In August and September, the worker is exempt from income tax. From October onwards, they will pay €56 in income tax, which is €2 less than the amount under the first tables of the year (January to July).
The different rates that will apply in August and September are intended to backdate the effects of the reduction in income tax brackets approved mid-year, as the withholding tax applied since the beginning of 2025 now needs updating to align with the new version of the income tax table.
From October onwards, companies and other employers (such as public services or IPSS) will once again withhold different rates.
In the case of pensions, the withholding model remains the same, with some rates from August to September and others from October to December.
In the next two months, pensioners will receive full pensions free of income tax withholding on amounts up to €1,116 gross per month (if they are single or married to someone who also earns income) or up to €1,152 (if they are married and the only member of the household with income). For amounts above this, the authority will withhold tax at lower rates than the current ones.
With this reformulation, the plan introduces three distinct discounts throughout 2025: a first from January to July; a second in August and September; and a third from October to December.
Let’s simulate these three periods for the salary of a single employee with no children, earning €1,500 gross per month.
Currently, the professional takes home €1,149 net. They pay €186 in income tax (an effective rate of 12.4%), which gives them a net salary of €1,314. However, as they deduct €165 for social security (11% of their gross salary), the final net amount that reaches their bank account is €1,149.
In August and September, the worker pays only €8 in income tax each month, instead of €186 (the effective tax rate drops to 0.55%, instead of 12.4%). During this period, the net salary rises to €1,492, and the final net amount (after income tax and social security) is €1,327.
From October to December, the withholding increases, and it will remain lower than in the first seven months of the year. The net salary (after income tax and social security) will be €1,154, an increase of €5 per month compared to the current amount (from January to July). Individuals will now withhold €181 per month, instead of €186 in the first months of 2025.
PCT/ADB // ADB.
Lusa
