Lisbon, July 22, 2025 (Lusa) - The new personal income tax tables released by the government on Tuesday maintain the trajectory of “approximation” between the tax collected monthly and the final personal income tax amount, according to Cláudia Reis Duarte, Secretary of State for Tax Affairs, speaking to Lusa.
“The path that has been taken is one of convergence between what [a taxpayer] has paid monthly through withholding tax and the tax they owe for the whole year.” This is the path that these withholding tax tables maintain, of convergence between the tax paid in instalments each month and the final tax bill,” said the minister in statements to Lusa regarding the publication of the new tables.
The Finance Portal published an order on Tuesday in which the Secretary of State said that the new withholding tax model, in force since the second half of 2023, brought the “tax withheld” closer to the “tax due in final terms”.
Now, with the reduction in personal income tax in the middle of this year, there will be a two-stage reduction in withholding tax from August.
In August and September, special rates will be applied, with lower values. In some cases, they will be 0% for gross salaries up to €1,136 and pensions up to €1,116 or €1,152, depending on the taxpayer’s family situation.
Then, from October to December, other rates will apply, higher than those in August and September, but lower than those currently in force from January to July.
The model is similar to the one applied at the end of last year. “There are two sets of tables: one for August and September, which reduces withholding rates much more sharply to reflect the previous months; then a new series of tables for October, November and December, which simply adjusts withholdings to the new personal income tax rates approved by parliament,” she said.
In some situations, the changes may result in a final personal income tax settlement that yields a smaller refund for some taxpayers or requires them to pay tax to the state.
For the government, the reduction in refunds means that the money is in the hands of taxpayers sooner.
“Tax is going down for everyone. Everyone is paying less tax. What may happen is that the final settlement, which in this case the administration will make only in 2026, may differ from previous years, due to adjustments in withholdings. But that’s a good thing: it means that people have their money in their pockets in advance, through adjustments in withholdings,” the minister said.
As the annual personal income tax takes into account the particular factors of each taxpayer from income to the value of deductions, including tax already withheld, the adjustment “depends entirely on the specific situation of each taxpayer,” she stresses.
The tables are updated in the middle of the year because parliament approved a bill this month that reduces the annual personal income tax rates to be applied in 2025 on income in the 1st to 8th brackets.
After these changes, the withholding tables are expected to be changed again in January 2026.
Next year’s State Budget will bring an additional reduction in personal income tax, as the new law requires the government to include an additional 0.3 percentage point reduction from the 2nd to the 5th bracket, which should lead to a further adjustment of the monthly discount.
Regardless of this change, the personal income tax code already requires parliament to update the values that define the annual brackets according to the variation in the GDP deflator, which has implications for the monthly tables.
“When the rule introduced in the State Budget changes the threshold for brackets, this immediately leads to changes in withholding tax, and therefore the expectation is that in January the State Budget will adjust again to reflect these changes, primarily because of this rule on updating brackets,” Cláudia Reis Duarte concluded.
PCT/ADB // ADB.
Lusa
