Which employees will see pay rises from today

This week marks a week of pay rises for approximately one million employees in the private sector, as changes to the personal income tax brackets come fully into force.

In practice, this means a reduction in the monthly tax withholding on salaries, which leads to a tangible increase in net earnings and an immediate benefit that will be felt in employees’ pockets. Public sector employees have already seen these increases, as their pay is prepaid for the month of work.

The tax reform submitted to Parliament by the Minister of National Economy and Finance, Kyriakos Pierrakakis, and the competent Deputy Minister, Thanos Petralias, and voted through last November, constitutes—according to ministry officials—the largest reduction in direct taxes since the restoration of democracy.

According to APE-MPE, the adjustments to the tax brackets provide for reductions in income tax rates ranging from 2 to as much as 8 percentage points for the vast majority of employees, while for large families the reductions in tax rates reach up to 22 percentage points. The extent of the reduction depends on three key factors: the level of taxable income, the number of dependent children, and the age of the employee.

It is characteristic, the same officials add, that the changes to the brackets primarily benefit the middle class, families with children, and young workers.

Indicatively, this results in a zero tax rate for young people up to the age of 25 and the introduction of a 9% tax rate for young people up to the age of 30 for incomes of up to €20,000 per year. In addition, a zero tax rate is provided for large families with individual annual income of up to €20,000, and a reduction of the tax rate to 9% for families with three children with individual annual income from €10,000 to €20,000.

Tax reductions are greater for middle and higher incomes, without this meaning that lower income brackets are not also positively affected, as they are simultaneously largely covered by the tax-free threshold.

Overall, approximately 4 million taxpayers benefit (public and private sector employees, pensioners, self-employed professionals, farmers) who are currently subject, based on their incomes, to income tax. The fiscal cost is estimated at €1.2 billion in 2026, €1.6 billion in 2027, and €1.53 billion for 2028 and subsequent years.