Workers May Face Higher IR in 2025 Due to Extra Reduction in Discounts, Warns the Order of Accountants
From November 2024, workers in Portugal may be subject to an additional IRS payment in 2025 due to changes in withholding tax tables. The Board of Certified Public Accountants (OCC) has warned that the temporary reduction in withholding rates that will occur in September and October, followed by an adjustment to the tables in November and December, may result in less withholding than necessary to cover the tax due. This scenario may generate the need for an additional income tax payment in the following year.
Changes to Retention Tables
During September and October 2024, withholding tax tables will be adjusted to reflect a temporary reduction in rates. This change aims to adapt withholdings to the new IRS model, approved by Parliament, which provides for a gradual reduction in tax. However, in November and December, the tables will be adjusted again, returning to monthly remuneration starting at R$935 and pensions starting at R$937 per month for single people without children. This adjustment may result in lower retention in the final months of 2024.
Risks and Implications for Workers
Temporarily reducing rates may seem advantageous in the short term, but, according to the OCC, workers need to be aware of the long-term implications. Decreased withholdings could lead to insufficient IRS payments throughout 2024, resulting in a higher tax bill in 2025 when tax is calculated based on annual earnings.
Outlook for 2025
In 2025, withholding tax tables are expected to be updated again to reflect inflation and productivity, as stipulated by approved legislation. This update could further increase the tax burden on workers, especially for those with a monthly income between 1,100 and 2,500 euros.
What Can Workers Do?
The Order of Accountants advises workers to closely monitor their withholding taxes and consider making voluntary adjustments, if necessary, to avoid unpleasant surprises in the 2025 tax return. Proactivity in managing personal finances will be essential to mitigate risks associated with changes in IRS tables.
These changes highlight the importance of careful financial planning, especially during periods of fiscal transition. It is recommended that taxpayers consult their accountants or financial planners to ensure they are prepared for the possible impacts of these changes to the IRS.
ECO
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