# Portugal Cabinet Approves IRS Bracket Cuts, Retroactive to 2026 > The Council of Ministers approved lower IRS rates on brackets 1–6 on 17 September 2026, retroactive to January — now awaiting parliament. - Source: https://www.growinportugal.com/news/portugal-s-cabinet-approves-irs-tax-bracket-cuts-retroactive-2026-09-26 - Publisher: GrowIN Portugal (https://www.growinportugal.com) - Published: 2026-09-26 - Last reviewed: 2026-09-26 - Language: en > **Key figures — as of 2026-09-26:** Rates cut by **0.3–0.5 percentage points** across IRS brackets 1–6 — first bracket down from **12.5% to 12.2%** — approved by Council of Ministers **17 September 2026**, retroactive to **1 January 2026** — covers taxable income up to **€43,090/year** and around **2.9 million households** — estimated cost to the State **≈€400 million** — sent to parliament as **Proposta de Lei 108/XVII/2.ª**. ## What the Cabinet actually approved On 17 September 2026 Portugal's Council of Ministers approved a bill authorising the government to reduce IRS rates up to the sixth taxable-income bracket, reinforcing disposable household income. According to the government's own release, the first bracket rate falls by 0.3 percentage points, brackets two through five drop by 0.5 points, and the sixth bracket falls by 0.3 points, while the standard rates for brackets seven through nine stay unchanged, though because IRS is progressive the cut still filters through to higher earners. In concrete terms, the first bracket rate drops from 12.50% to 12.20%, and the second from 15.70% to 15.20%. The reduced scale applies to taxable income up to €43,090 a year and, per the Finance Ministry's own simulations, reaches more than 2.9 million households. This isn't a one-off. The government's presentation to the Council notes it is the fifth IRS reduction under this administration, which has already cut family income tax by €2.4 billion, and a household earning an average €2,000 a month has accumulated savings of between €1,500 and €3,000 a year from prior cuts alone. The measure is expected to cost the State around €400 million. Crucially, this remains a proposal, not law. It is currently a bill that still needs to go to Parliament and pass through scrutiny by MPs, and the legislative authorisation Cabinet is requesting, once granted, will remain valid for 180 days. ## What it means for expat payslips For foreigners on standard Portuguese payroll — as opposed to those under IFICI's flat 20% or the closed NHR regime — the mechanics matter more than the headline. Because the cut is retroactive to January, employers can't simply apply new rates going forward; withholding tables have to be rebuilt so the shortfall gets reconciled. Reporting suggests the reduction will begin to be reflected in workers' income in November, meaning most salaried expats should expect a lump-sum correction alongside slimmer monthly deductions for the rest of the year, rather than an immediate change to September or October pay. The government's own simulations give a sense of scale: annual savings range from €12.10 for a single worker earning €1,000 gross per month to €343.66 for a couple earning a combined €8,000 gross per month. And because the new rates apply to the first six brackets while rates for brackets seven through nine stay put, higher earners still benefit given IRS's progressive structure. ## GrowIN's take on the numbers Run the government's own figures and the gap is stark: €343.66 a year works out to a little over €28 extra a month for the higher-earning couple, against roughly €1 a month for the single worker near minimum wage — a savings differential of almost 28 times between the two examples the Finance Ministry itself published. For expats weighing whether this cut is worth tracking, that's the honest answer: it's real money for mid-to-higher earners, but marginal for anyone near the minimum wage floor. "A tax cut announced in September, backdated to January, tells you more about election-year timing than about payroll software catching up," says GrowIN Portugal Editorial. ## What to watch next The bill still needs parliamentary approval before the new rates and revised withholding tables become binding — track it via our tax and NIF hub, and cross-check any figures directly with [Portal das Finanças](https://www.portaldasfinancas.gov.pt) before adjusting your own budgeting. Freelancers on recibos verdes won't see automatic adjustment; any benefit will only show up when they file between 1 April and 30 June 2027 for the 2026 tax year. Expect the Diário da República to publish updated withholding tables once the law clears parliament, likely in the run-up to November payroll cycles. Nothing here changes IFICI eligibility, NHR transitional rules, or the separate IRS bracket thresholds set in the 2026 State Budget — this is a rate cut layered on top of an already-updated bracket structure, and the two shouldn't be confused when checking your own numbers. ## Sources - [The Portugal News](https://www.theportugalnews.com/news/2026-09-18/portugal-proposes-income-tax-reduction/1087989) - [Government of Portugal (portugal.gov.pt)](https://portugal.gov.pt/gc25/comunicacao/noticias/novas-taxas-de-irs-consulte-as-simulacoes-e-saiba-quanto-pode-poupar) - [Jornal de Negócios](https://www.jornaldenegocios.pt/economia/impostos/irs/detalhe/governo-aprovou-descida-intercalar-do-irs) - [regfollower](https://regfollower.com/portugal-proposes-further-irs-reductions-for-2026-income/) --- © GrowIN Portugal. Cite as: GrowIN Portugal, "Portugal Cabinet Approves IRS Bracket Cuts, Retroactive to 2026", https://www.growinportugal.com/news/portugal-s-cabinet-approves-irs-tax-bracket-cuts-retroactive-2026-09-26