Cabinet Approves the Decree-Law Behind Portugal's 2026 IRS Cut, Backdated to January: Six Brackets Lower and Up to 171 Euros a Year Saved
The Council of Ministers approved the decree-law cutting IRS rates on the first six brackets by 0.3 to 0.5 points for all of 2026. It still needs the President's signature. November withholding is halved; the rest is settled in the 2027 return.
The Government took the last decision of its own needed for this year's IRS (personal income tax) cut on Thursday. The Council of Ministers approved a decree-law that lowers the rates on the first six income brackets "com efeitos desde 1 de janeiro de 2026" (with effect from 1 January 2026). The communiqué says the measure benefits almost 3 million families and reduces tax on income from work and pensions.
The decree-law uses the power Parliament gave the Government in Lei n.º 64-B/2026 (Law 64-B/2026), published in the Diário da República (official gazette) on 22 October. Under the Constitution's article 134, a decree-law still has to be promulgated by the President of the Republic and published before it takes effect. The text of the decree-law itself has not been made public yet.
The new rates
The law fixes the rates the decree-law must set in article 68 of the Código do IRS (Income Tax Code). The bracket limits do not change, and the top three rates stay at 43.1, 44.6 and 48 percent. Current rates are those on the tax authority's page for article 68.
- Up to 8,342 euros of taxable income: 12.5 to 12.2 percent
- 8,342 to 12,587 euros: 15.7 to 15.2 percent
- 12,587 to 17,838 euros: 21.2 to 20.7 percent
- 17,838 to 23,089 euros: 24.1 to 23.6 percent
- 23,089 to 29,397 euros: 31.1 to 30.6 percent
- 29,397 to 43,090 euros: 34.9 to 34.6 percent
Because the tax is progressive, everyone with taxable income (rendimento coletável, what remains after the deductions the code allows) pays less on the part that falls in these brackets. By our own calculation from the two sets of rates, a single taxpayer saves about 58 euros a year on 15,000 euros of taxable income, about 83 euros on 20,000 euros, and about 171 euros from 43,090 euros upwards, where the saving stops growing.
Presenting the decision, Minister of the Presidency António Leitão Amaro called it "mais 400 milhões de euros no bolso das pessoas" (400 million euros more in people's pockets), ECO reports.
When it reaches your pay
The decree-law does not itself change November payslips: that relief was set separately. Despacho n.º 12523-A/2026, the Finance Minister's order of 13 October, halves the IRS withheld from salaries and pensions paid between 1 and 30 November in mainland Portugal, including a Christmas bonus paid that month. Only very high monthly incomes are left out. From 1 December the normal 2026 withholding tables apply again. We set out what that means in euros when the order came out.
The lower rates themselves are applied when 2026 income is assessed on the annual return filed in 2027. For many people the November withholding cut will give back more than the annual saving above, which means a smaller refund, or in some cases a bill, next year. Leitão Amaro acknowledged the trade-off, ECO reports: "Menos retenção significa menos empréstimo ao Estado e menos dinheiro a receber mais tarde" (less withholding means less lent to the State and less money to receive later).
What you need to do
Nothing. Employers and pension payers apply the November rule, and the tax authority applies the new rates in the 2027 assessment. If you live in the Azores or Madeira, the November order does not cover you, so check with whoever pays you. The scale changes again in 2027 if the 2027 budget passes its final vote on 24 November.
The same Council of Ministers also authorised the Air Force to buy a long-range mobile radar system for up to 22.2 million euros between 2026 and 2028.
