In a significant move to boost disposable income and provide relief to taxpayers, Malta’s government has announced substantial changes to the income tax brackets set to take effect in 2025. This comprehensive reform aims to benefit a wide range of income earners, with the most significant impact on low to middle-income households. Let’s delve into the details of these changes and how they might affect you.
Overview of the Changes
The new tax structure will widen the tax bands across all three tax categories: single, married, and parent. This adjustment will result in tax savings ranging from €345 to €675 for most taxpayers[1][2].
Breakdown by Tax Category
Single Rate
– Tax-Free Threshold: Increased from €9,100 to €12,000
– 15% Tax Band: Now applies to income between €12,001 and €16,000
– 25% Tax Band: Applies to income between €16,001 and €60,000
– 35% Tax Band: Remains unchanged for income above €60,000
Single taxpayers can expect to save between €435 and €675 annually[1][2].
Married Rate
– Tax-Free Threshold: Increased from €12,700 to €15,000
– 15% Tax Band: Now applies to income between €15,001 and €23,000
– 25% Tax Band: Applies to income between €23,001 and €60,000
– 35% Tax Band: Remains unchanged for income above €60,000
Married couples opting for individual tax calculations could potentially double their savings, with each spouse benefiting from a tax reduction of €345 to €645 per year[2].
Parent Rate
– Tax-Free Threshold: Increased from €10,500 to €13,000
– 15% Tax Band: Now applies to income between €13,001 and €17,500
– 25% Tax Band: Applies to income between €17,501 and €60,000
– 35% Tax Band: Remains unchanged for income above €60,000
Parents can expect to save between €375 and €650 annually[2].
Impact on Different Income Levels
Low-Income Earners
The widened tax-free thresholds will have a significant impact on low-income earners. Approximately 18,000 workers who previously paid the lowest tax rate of 15% will no longer be required to pay income tax[4]. For instance, a worker earning €11,500 annually (just above minimum wage) who previously paid about €360 in income tax will now pay nothing.
Middle-Income Earners
Middle-income earners will also see substantial benefits. The 25% tax bracket has been adjusted to cover earnings up to €60,000 consistently, simplifying the tax structure for this income range[3].
High-Income Earners
For those earning above €60,000, the top tax rate remains unchanged at 35%. However, there will be slight increases in deductions, providing some benefit to high-income earners as well[4].
Additional Benefits
The government has announced that these tax cuts, combined with increases in children’s allowance, will result in an average nuclear family (two parents and two children) having an extra €1,800 in disposable income[4].
Financial Implications for the Government
This tax reform is expected to cost the government approximately €140 million to implement. Finance Minister Clyde Caruana has stated that these cuts are made possible due to improved tax collection efforts, which recouped an additional €500 million last year compared to the previous year, without altering the tax base[4].
Conclusion
The 2025 income tax reforms in Malta represent a significant shift in the country’s approach to taxation, aiming to provide relief to a broad spectrum of taxpayers. While the changes are most beneficial to low and middle-income earners, they offer some advantages across all income levels. As we approach 2025, it’s advisable for all taxpayers to review these changes and consider how they might impact their financial planning.
Remember, for personalized advice on how these tax changes will affect your specific situation, it’s always best to consult with a qualified tax professional.
Citations:
[1] https://www.maltatoday.com.mt/news/budget-2025/132010/explained_how_your_income_tax_brackets_will_change_in_2025_
[2] https://www.independent.com.mt/articles/2024-10-28/local-news/Budget-2025-Taxpayers-will-benefit-from-tax-reduction-of-up-to-675-tax-bands-widened-6736265303
[3] https://lovinmalta.com/news/budget-2025-tax-slashed-on-income-up-to-e16k-no-change-for-high-income-earners/
[4] https://timesofmalta.com/article/budget-2025-income-tax-slashed-wider-tax-bands-introduced.1100205