Portugal Workers & Pensioners Keep €920 Tax-Free Monthly Under 2026 IRS Cuts

Portugal’s payslips are getting a timely lift: the new withholding tables published by the Tax Authority promise zero IRS deductions on every euro up to 920 € a month and slimmer levies for most earnings above that line. For workers and pensioners, this means noticeably higher net income without waiting for the annual refund.

Snapshot for the busy reader

• Complete IRS exemption on wages and pensions up to 920 €

• Rates between the 2nd and 5th brackets slide 0.3 p.p.

• Income thresholds for all nine brackets rise 3.51 %

• The minimum-existence level jumps to 12 880 € a year

• Tables apply from 1 January 2026; firms must adjust by February at the latest

Why the 920 € mark matters

Setting the exemption precisely at 920 € aligns fiscal policy with the 2026 national minimum wage. That simple move spares roughly one million low-paid residents from any IRS deduction each month, ensuring the State’s fight against in-work poverty is felt immediately in net salaries. Pensioners at equivalent income levels enjoy the same relief, a boost the senior lobby has demanded for years.

The fine print of the new tables

The Finance Ministry redesigned the tables around three headline tweaks:

Brackets re-indexed 3.51 % – cushioning inflation and preventing bracket creep.

0.3 percentage-point cut on the 2nd through 5th tiers – a rare nod to middle-income taxpayers.

Minimum-existence floor lifted to 12 880 € – equivalent to 14 months of 920 €, shielding low wages from tax entirely.

Together, these elements bring the monthly withholding closer to the actual annual bill, so the springtime refund should shrink – a boon for Treasury cash-flow and for taxpayers who dislike the State’s “interest-free loan”.

What shows up on your payslip?

Below are illustrative figures for a single worker with no dependants; real numbers vary with marital status and allowances but the trend is clear:

• 1 000 € gross ➜ 35 € IRS (down from 56 €)

• 1 200 € gross ➜ 96 € IRS (was 107 €)

• 2 500 € gross ➜ 471 € IRS (was 492 €)

• 3 500 € gross ➜ 857 € IRS (was 879 €)Families feel the cut even more. A single parent earning 1 200 € with two children sees IRS shrink to 27 €, while a dual-earner couple at the same pay level and two dependants hands over 53 €.

Employers under the microscope

Payroll departments must deploy the new tables immediately. If January’s run goes out with the old rates, companies must correct the oversight in February – a double recalculation no wage office enjoys. The Tax Authority has warned that systematic delays may trigger fines starting at 200 € per infraction.

Ministers enthused, economists cautious

Finance chief Joaquim Miranda Sarmento hailed the reform as a “real, monthly” tax cut for the “vast majority of Portuguese households”. Independent analysts concede the relief is broad but question its durability if growth under-delivers. Rui Moreira, commenting on CNN Portugal, flagged the risk of a future funding squeeze should revenue dip faster than spending adjusts.

Portugal in the European lens

With the fresh threshold, Portugal nears Austria’s 13 308 € annual exemption in proportional terms, edges above Belgium’s 10 570 €, but remains far below Cyprus’s generous 19 500 €. The comparison underscores how Lisbon’s system is becoming slightly friendlier to low wages while still relying on a progressive model that begins taxing earlier than in some peers.

Looking ahead: what taxpayers should do now

Check February’s payslip to confirm your employer applied the correct table.

Update withholding options on the Finance Portal if your household situation changed.

Plan cash-flow: expect a smaller IRS refund next year because less tax is being withheld today.

For most households, the 2026 tables translate into a modest but tangible pay rise every month. And in a year forecast to see electricity and mortgage costs inch up again, every extra euro in take-home pay will count.