Lisbon, July 25, 2025 (Lusa) - The new income tax withholding tables will, as a rule, lower refunds or raise the amount taxpayers pay when settling their taxes in 2026, according to simulations by PwC.
As was the case in 2024, when the government also reduced tax in the middle of the year, it is adjusting the withholding tax tables in August and September to offset the withholdings already made in the first months of the year based on a version of the income tax Code prior to the tax relief.
As a result, withholding rates are significantly lower than those applied from January to July, and some taxpayers even qualify for full exemption.
Then, in October, November and December, they change again, to values higher than those in August and September, but lower than those applied in the first seven months of 2025.
PwC’s simulations show how the total amount withheld throughout 2025 - based on the tables for January to July, August to September, and October to December - will affect the final settlement in 2026 for 2025 income.
These calculations enable taxpayers to determine whether their refunds will increase or decrease next year, whether taxpayers who have already paid taxes will pay more or less, and whether some taxpayers will transition from a rebate to a collection situation.
Joana Garrido, from PwC’s tax team, explained to Lusa that “the significant decrease” in the amount withheld in August and September “will mean, in almost all cases analysed, a decrease in the IRS refund or an increase in the additional IRS to be paid” when taxpayers file the IRS return in 2026, compared to the IRS for 2024.
The tax expert confirms that the monthly withholding tax increasingly approximates the annual tax, a trend that limits the situations leading to income tax rebates.
“When we examine income levels above approximately €3,000, we can see that, in the vast majority of cases, after taxpayers file the annual IRS return, they will pay an additional amount of IRS, unlike the rebate that occurred in 2024,” she notes.
According to Joana Garrido, this effect arises mainly because the withholding tax rates in August and September “are significantly lower than those applied in August and September 2024” for taxpayers “with income levels up to approximately €20,000”.
According to the simulations, a single employee with no children earning €1,500 gross will pay €2,354.73 in income tax on their 2025 income (this is the actual final income tax amount). As they will have withheld €2,228 throughout this year, they will have to pay €126 to the State in the final settlement, because the amount deducted was less than the actual tax. The same thing happened with the 2024 income tax: less than the actual tax payable was withheld, but the difference was smaller, and the IRS asked them to pay €91 at the time of settlement.
Other simulated cases show identical situations, for example, single workers who earn £1,250, £1,750, £2,500, £3,000, and £3,500 and do not have children.
However, there are also situations where the settlement is lower. This happens to single workers without children who earn €950 or €2,000.
Those who earn €5,000, €6,000 or €7,000 per month will no longer receive a refund and will have to pay income tax at the time of settlement, a circumstance that applies to single workers with no children, married workers with no children and workers with two children.
Note that, in some situations, the amount of tax deductions may dictate a different outcome, meaning that, rather than paying, a taxpayer may continue to receive a refund.
The simulations relate to abstract and simple cases. In the case of deductions, PwC assumes that “the taxpayer may only claim general and family expenses of €250 as a deduction.”
PCT/ADB // ADB.
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