Key figures — as of 2026-09-11: €400 million estimated cost — more than 2 million households affected — cuts run through the 6th IRS bracket, retroactive to 1 January 2026 — relief appears in November payslips, pensions and the Christmas subsidy (subsídio de Natal), pending Council of Ministers approval.
The headline number
Portugal's government is cutting income tax rates through the sixth IRS bracket, and the change will land — quite literally — in November pay packets. A new income tax reduction announced by the Government will have retroactive effects to January and will begin to be reflected in workers' income in November, with the measure expected to directly affect more than two million households and reach up to the sixth IRS bracket. Prime Minister Luís Montenegro made the announcement on Tuesday, 8 September, during the debate on the motion of censure presented by Chega in the Assembleia da República.
The budgetary price tag is an estimated €400 million, with the tax relief due to be approved at the following week's Council of Ministers meeting. It's the fifth time Montenegro's government has adjusted IRS rates since taking office, and the third mid-year cut outside the normal State Budget cycle.
Who actually benefits
The mechanics matter more than the headline. Because IRS is progressive, Montenegro pointed out that although the cut only touches the rates of the first six brackets, the relief in practice covers virtually every taxpayer who pays IRS, since annual tax is calculated progressively. Every euro earned within those first six bands — even by someone whose top marginal rate sits in bracket 7, 8 or 9 — gets taxed at the new, lower rate.
For foreign workers on a Portuguese payroll and paying tax as residents, that's good news: the reduction flows through the standard withholding tables (tabelas de retenção na fonte) used by every employer, public or private. It does not apply to non-residents taxed at the flat 25% rate on Portuguese-source income, nor to anyone under the 20% flat-rate IFICI regime for qualifying skilled and research roles — those sit outside the progressive scale the cut is adjusting. Anyone unsure which regime applies to their situation should check our tax & NIF guide before assuming this cut changes their number.
Why November, and why it might feel bigger than expected
Because the change is retroactive to January but only takes technical effect once new withholding tables are published, the correction for ten months of "over-withholding" has to be squeezed into a handful of payments. As one tax adviser told CNN Portugal, a full retroactive correction concentrated entirely in November and December "não é pensável" — not feasible in full by December — the more realistic scenario is a rise in net salary in November, December, and the Christmas subsidy, alongside a larger tax refund in 2027. The Finance Minister has been blunter about the direction of travel, telling SIC Notícias in comments reported by CNN that "os portugueses terão mais salário em novembro" — Portuguese workers will have more salary in November.
Officially, the government's own statement confirms the mechanism: the tax relief will be felt from November through a reduction in withholding, both on salary and the Christmas subsidy, with effects retroactive to January 2026.
GrowIN's read on the numbers
Nobody — not the government, not tax advisers — has published bracket-by-bracket figures yet; further detail will only be known once the Council of Ministers decree is published, expected next week. But the structure alone tells foreign employees something useful. Spread evenly, €400 million across roughly two million households works out to a modest annual average. Compressed instead into just three pay events — November salary, December salary, and the Christmas subsidy — rather than twelve, the per-payment bump those three payslips carry could look several times larger than a simple monthly average would suggest, before settling back into the normal 14-payment rhythm in 2027. That's arithmetic, not government guidance, and actual amounts will depend entirely on income level and household situation.
GrowIN Portugal Editorial's take: for foreign staff on Portuguese payroll, this isn't a raise — it's an overdue correction arriving all at once, so budget the November uplift as a one-off, not a new baseline.
What to watch next
The measure still needs Council of Ministers approval and updated Finanças withholding tables before payroll departments can apply it — HR teams processing salaries for foreign staff should watch the Portal das Finanças for the revised tabelas de retenção. The final reconciliation, as always, happens when the 2026 IRS return is filed between 1 April and 30 June 2027; any gap between what was withheld and what's actually owed gets settled then, not before.
For now, foreign workers on standard employment contracts in Portugal can expect a friendlier November payslip. Those on flat-rate regimes or non-resident status shouldn't expect to see it at all.