Reduced Inflation Adjustment for Income Tax (Box 1)

From 1 January 2026, the Dutch government will not fully adjust tax brackets and deductions for inflation. This decision aims, among other things, to preserve the reduced VAT rate (9%) for culture, media, and sports — which requires additional funding.

Inflation adjustment works as follows: annually, the government raises tax brackets and deduction amounts in line with price and wage growth, maintaining a stable tax burden.

In 2026, inflation is projected at 2.9%, which means multiplying amounts by 1.029. However, the government proposes to apply only 52.8% of this adjustment.

This means amounts will be multiplied by 1.015312 — less than needed for full inflation compensation.

As a consequence:

• Tax brackets will increase less than they should
• Taxpayers will enter higher tax brackets sooner
• This means income tax will increase, even if wages remain unchanged

| Category | 2025 | 2026 (as it will be) | 2026 (as it could have been) | | ----------- | ------- | -------------------- | ---------------------------- | | 1st bracket | €38 441 | €38 883 | €39 278 | | 2nd bracket | €76 817 | €79 137 | €80 188 |

Tax credits will also increase less than under a full inflation adjustment.