The Government approves the increase in the minimum wage and tax threshold
This afternoon, Tuesday, the Governing Council approved the increase in the Personal Income Tax (IRPF) threshold for 2024 from 15,000 euros to 15,876 euros annually. This increase is in line with the new rise in the Minimum Interprofessional Wage (SMI), so that no extra tax is due from those who benefit from the minimum wage increase.
The Minister of Finance, María Jesús Montero, explained in the press conference following the Council of Ministers that, similar to last year, the approved increase in the SMI will be accompanied by a legal change to ensure that "no person pays IRPF (tax) below that income threshold."
"In other words, taxpayers earning up to that threshold will be exempt from paying the corresponding taxes," she said.
According to Montero, this regulation change represents a tax reduction for incomes below 20,000 euros and will mean that workers earning the minimum wage – 1,134 euros per month (based on 14 payments a year) in 2024 – will not face any tax retentions. "This IRPF measure will benefit 5.2 million low-income taxpayers in Spain, saving them 1.3 billion euros in tax in 2024."
For instance, Montero explained that a person earning exactly the SMI of 15,876 euros annually had a 7% withholding tax in 2017-2018, paying 1,111 euros per year to the tax authorities. With the approved tax reduction, citizens will now not have to pay anything.
Another example: a person earning a salary of 18,500 euros, which corresponds to the most common salary in the country, will pay 1,128 euros in 2024 compared to the 2,000 euros paid in 2018, "almost half of what was paid under the PP government."
The same applies to pensioners with low and medium benefits, who will also pay less tax than under the PP government, according to Montero. A retiree aged 65 to 75 with a pension of 1,214 euros – 17,000 euros annually – was taxed 1,462 euros in 2018, while in 2024, they will pay just 224 euros.
In contrast to this tax reduction for low incomes, Montero acknowledged that more effort has been requested from those who have more, noting that the Government has increased taxation on capital incomes exceeding 200,000 euros, introducing a solidarity tax on large fortunes, levies on banking and energy, and a 15% corporate tax for multinational companies.
Other articles that may interest you...