New legislation
The Ministry of Finance is proposing to abolish the withholding tax, which today allows for simpler taxation of certain income – for example, from work contracts or temporary jobs. If the change goes through, more employees will have to worry about filing their own tax returns. The change is also expected to affect people with low side income who do not have to deal with the tax today.
Employees would now have to file their own returns if they want to claim tax credits or deductions. The change would also bring greater state control over employees’ income through a so-called single monthly report from employers.
The abolition of the withholding tax is to take place in two phases – the first from January 2026 and the second from 2027. The proposal is already in the House of Commons, specifically under the number 926. Exceptions will be made, for example, for people in the flat-rate tax regime or non-residents in certain specific situations. The proposal has its opponents – the opposition is planning a filibuster and it is possible that a compromise or retreat from the plan will eventually be reached.
We will continue to monitor the entire legislative process closely.
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