Personal income tax advance for employees in 2026: how does it work in practice?

What is a personal income tax advance

For employees (i.e. people with earned income), the logic is simple: the state does not want to wait until the end of the year to collect the tax. That’s why the law sets up a system where the employer calculates the tax on an ongoing basis and deducts it from wages as an advance. Thus, the employee does not send the tax himself, but the employer withholds and pays it for him.

The word ‘advance’ is important : it is not necessarily a final tax. It is an ongoing amount that is paid at the end of the year and is compared to what your actual tax liability is for the year. The difference then works out in one of two ways: either you get a refund of part of the tax (overpayment) or you get a top-up (typically when you have multiple incomes).

Who decides the amount of the advance

The amount of the monthly advance tax payment is not set by the employee – it is calculated by the employer, who acts as the taxpayer in the employment tax system. The taxpayer is obliged to calculate the tax correctly, deduct it from the wages, pay it to the tax authorities and is also responsible for the correctness of the deduction to a certain extent. In practice, this works in a similar way to social security and health insurance: the amount is calculated according to the rules and automatically deducted from your wages by your employer.

Importantly, even if you don’t determine the advance directly, you can influence the amount – typically by signing a Taxpayer Declaration with your employer and claiming (if you qualify) monthly tax credits and, where applicable, child tax credits. If you don’t sign the declaration (or the discounts can’t be claimed), the advance will be higher.

What exactly does your employer do each month

Each month, your employer will take your wage information (for example, hourly wage and number of hours worked, bonuses, allowances) and determine what is taxable income. It then determines what’s called the ‘ advanceable earnings base’ – in simple terms, this is the amount on which tax will be calculated (typically your taxable pay in that month, less items that are either not taxable or taxed under a different regime). Your employer will then calculate the advance at the statutory rates and deduct the result from your pay and pay it to the taxman.

It is important for you as an employee to know that the advance is just an ongoing payment “on account” of the annual tax. The final reconciliation will only take place at the annual settlement or on the tax return (which is why you may pay more during the year and then get an overpayment, or vice versa).

Advance student tax: is there a difference?

One thing needs to be made clear here: a student is not a special tax category just because they are studying. If you work as a student on a part-time basis, you are still typically a salaried employee for tax purposes, and the same rules apply for calculating advance payments as for anyone else.

But what has changed in recent years and is of practical importance to students: the student allowance has been abolished for income from 2024. It last went to claim for the 2023 tax year.

What does this mean in practice? If you’re a student and you’re working, your highest tax credit is likely to be the basic rate tax credit (which has been retained). The law sets the basic ratepayer’s allowance at £30,840 per year. And it is when you sign the taxpayer’s declaration that the payroll office applies the appropriate monthly portion of the discount and your personal income tax bill can come out very low – sometimes even zero (depending on your salary).

It is common for part-time jobs to have tax withheld (not withheld in advance) without a signed declaration. Then the taxpayer discount is not applied during the month, but sometimes the tax can be recovered through the tax return.

Taxpayer declaration: why it is key for advances

The taxpayer’s declaration for personal income tax from employment (popularly known as the pink paper) is the document that decides whether your employer will take your tax benefits into account when calculating your monthly tax advance. When you sign it, you are giving your employer a clear instruction: claim my tax credits and, if applicable, tax benefits. You’ll usually see the result right on your payslip – the advance tax payment will come out lower, sometimes even zero (typically for lower incomes and when the basic ratepayer discount is applied).

If you don’t sign the pink slip, your employer will still calculate your tax according to the statutory rules, but there are no discounts and allowances to claim (or only limited ones to claim, depending on the scheme that applies to you).

Your employer will typically give you the Declaration to sign when you start work. However, in practice, sometimes this does not happen automatically for temporary jobs (DPP/DPT), or no one actively offers it to you – and then it happens that the employee only realises in hindsight that his/her net pay could have been higher.

Why are you only signing it with one employer

The essential rule of thumb is that you should not claim the discount twice in the same calendar month. That’s why the declaration normally only runs with one employer (especially if you have multiple employment relationships running concurrently). The point is simple: the taxpayer discount and other discounts are not per payroll separately, but are linked to the taxpayer’s person – so it wouldn’t make sense for them to run concurrently with two payers at the same time.

In other words, if you have two part-time jobs at the same time, it is quite common to sign a declaration for only one of them – where the discounts will be reflected in your advances. For the second part-time job (without a declaration), your advance will be higher, or some agreements will have tax withheld.

Declaration as a ticket to the annual accounts

The declaration has another very practical impact: it also serves as one of the basic documents for the annual settlement of advances and tax credits, which your employer can make (if the conditions are met). This is the most convenient option, as you avoid having to file a tax return and your employer will reimburse any overpayment through your wages.

How the advance personal income tax payment is calculated for an employee

Your employer will calculate your advance personal income tax each month from what is known as the advance calculation base. In simple terms, it takes your taxable wages for the month (i.e. the amount that is actually taxable) and uses this to determine how much you should pay in advance tax for the month, according to the statutory rules. The advance payment is therefore an interim payment – it is not yet the final annual tax, but an amount that is compounded during the year and cleared at the end of the year.

The calculation itself will most often involve the amount of your taxable pay, the rate of tax, and whether you have a signed taxpayer declaration with your employer.

In addition, two tax rates apply to income from employment. In most normal situations, the standard rate of 15% applies, but for high incomes the law also provides for a higher rate of 23%, which applies to the part of the income exceeding 36 times the current average wage. During the year, it may already be reflected in monthly advances, but the final assessment is always made in the annual statement or tax return.

In simple terms, this is a mechanism that affects rather above-average and very well paid employees.

When withholding tax is paid instead of the advance payment

There are two tax regimes in employee income that are confusing at first sight: advance tax and withholding tax. You know the advance tax from your regular pay – your employer calculates it each month and withholds it as an advance on your annual tax. Withholding tax, on the other hand, only applies in certain situations defined by law and typically applies to smaller earnings (mainly agreements) where you don’t have a signed taxpayer declaration with your employer.

The most common case: FTE up to CZK 12,000 per month with one employer

The most typical situation is a part-time work arrangement (DPP). If you do not have a signed declaration and the conditions for withholding tax are met, income from a DPP of up to CZK 12,000 per calendar month will be subject to withholding tax.

Practical example: you have a fixed-term contract for CZK 8,500 per month and you have not signed the Declaration. Your employer withholds tax from your remuneration. However, the next month you receive CZK 13,000 – this means you will no longer fit into the limit and the regime changes: such income is usually taxed in advance (and this often changes the insurance contributions at the same time, but that’s another topic).

FTEs and other low incomes: the limit for participation in sickness insurance is decisive

However, the withholding tax does not only apply to FTEs. The law also deals with a second category: other earnings from employment (typically a FTE or small-scale employment), where the assessment is whether your total income with the same employer for the month is below the threshold for participation in sickness insurance.

The limit for 2026 is set at CZK 4,500. Therefore, if you do not have a declaration and your remuneration from a DPP (or other small non-PPP employment relationship) with one employer does not exceed CZK 4,499 per month, it will be subject to withholding tax.

The withholding tax is usually final, but sometimes you can get it back

In practice, withholding tax is often treated as final – the employer withholds it, pays it and that’s the end of it for that income. That’s also why purely withholding jobs often don’t have an annual settlement at all.

But at the same time, there is the possibility that you include the withheld income on your tax return (typically when it’s worth it for tax credits) – and then the withholding tax is taken into account on the return. However, if you take this approach, you must include all income that falls under this regime on your return (not just pick and choose what you find advantageous).

Annual return vs. tax return

At the beginning of each year, employees often ask the same question about how to sort out their taxes: through the annual return or the tax return? The main difference is who does the final comparison at the end of the year between how much you paid in deposits during the year and how much the annual tax actually comes out. In the case of the annual return, your employer does this for you, whereas in the case of the tax return, you as the taxpayer do it all yourself.

When the annual statement is enough

As a general rule, you only need an annual tax return if you have earned income from one employer, or if you changed employers during the year but never had two jobs in the same calendar month (i.e. you did not work for two different employers in the same period) and you signed a tax declaration for all of them for the tax year. You must also meet the condition that (apart from exempt income and income subject to withholding tax) you have no other taxable income exceeding CZK 50,000.

In such a situation, your employer will calculate the annual tax based on your submissions, compare it with what they withheld in advances during the year and then reflect the difference in your pay. You must apply for an annual tax assessment usually by 15 February.

When you typically need to file your tax return

You typically have to file atax return when your situation has “grown” so much during the year that your employer can no longer simply close it with an annual statement. The most common trigger is the overlap of multiple employers in the same period – for example, two jobs or two part-time jobs at the same time that withheld deposits in the same period.

The second common trigger is other income that falls outside of your normal employment, typically a business, renting or higher one-off taxable income over the £50,000 threshold.

And thirdly, a tax return may also be in order if you want to claim additional allowances or deductions that were not taken into account during the year (for example, because you didn’t have a signed declaration or you supplied the necessary documents late).

Summary of withheld advance payments of employment tax

Whether you’re dealing with your employer’s annual accounts or preparing your tax return, you’ll come across an important figure: the total amount of income tax withheld. You’ll find this on the taxable income statement you get from your employer (typically at the end of the year or when you leave your job).

What exactly does this figure mean? It’s the sum of all the tax payments your employer has deducted from your pay and paid to the tax authorities during the year. It is this total that is then crucial for the final settlement: when you settle your annual accounts or tax return, the total of the advances is compared with what your tax liability is for the year. If you have paid more in advances, you will be overpaid and the money will be refunded (either through your employer or the tax office). If, on the other hand, you have paid less, you will get a top-up.

Summary

For employees (including temporary workers), the advance payment of personal income tax is an ongoing payment for future annual tax – the employee does not send it himself, but the employer calculates it each month, deducts it from the wages and pays it to the state. This is not necessarily the final amount: at the end of the year, the advance payments are compared with the actual annual tax liability and either an overpayment (refund) or an underpayment (often when multiple incomes are combined) occurs. In practice, the amount of the advance payments can be significantly affected by the taxpayer’s signature of the taxpayer declaration, as only then are discounts (typically the basic taxpayer discount) reflected in the monthly tax, and the advance payment can be very low or zero.

In addition to the advance tax, there is also a withholding tax, which typically applies to smaller earnings on agreements without a signed declaration (most often FTC up to the limit) and is perceived as final, although it can sometimes be recovered. Whether you just need to file an annual statement with your employer or file a tax return is usually mainly determined by the overlap of multiple employers in the same month and other taxable income above the limit.