Income tax: will your withholding tax increase in January 2025?

Due to a lack of budget, the brackets of the income tax scale will not be revalued in line with inflation on January 1, 2025. But will the amount of your withholding tax automatically increase as a result?

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A hard blow to your purchasing power? In the absence of a finance law for 2025, many measures supposed to apply from January 1, 2025 will not come into force. At least not on the planned date. Among them, the revaluation of the income tax scale, the brackets of which should have been indexed to price increases if the budget had been adopted before the end of the year. Which will therefore not be the case, the new Prime Minister François Bayrou hoping present a new budget “in mid-February”. As several weeks of examination in Parliament will be necessary for adoption (hypothetical for the moment) of this text, the indexation of the brackets of the income tax scale will be postponed for several months. In the meantime, it is therefore the 2024 scale, effective on income received in 2023, which will continue to apply. Hence the risk mentioned for taxpayers whose income has increased this year of having to pay more income tax from January and, for some, of becoming taxable. A brandished threat several times by the government and the former tenant of Matignon, Michel Barnier, before the examination of the motion of censure which caused his fall.

Bad news if you have opted for the neutral direct debit rate

But what will really happen for the withholding tax (NOT) operated on your income received in January or February? Should you really expect to see your after-tax take-home pay or pension decrease? The tax administration answered these questions in a frequently asked questions (FAQ) dedicated to the effects of the non-revaluation of the tax schedule on income. And good news: “The PAS rates applied in January 2025 remain unchanged.” Because as the tax authorities point out, these percentages are only updated each year in September, after taking into account the income tax return made in the spring and the tax news of the year. “Thus, the PAS rates applied in the first months of the year are never updated from the voted scale”continues the General Directorate of Public Finances. In other words, the absence of a revaluation of the scale at the start of 2025 will not change anything in the amount of tax deducted from your income.

Be careful, however, if you have chosen the application of a neutral rate withholding tax, so that your employer does not know the other resources of your tax household. The rate scale, usually revalued from January, not being so this year, “users who have opted for the default PAS rate will continue to be applied the grid currently in force, until the publication of its update in the finance law for 2025”warns the tax authorities. It is only upon publication in the Official Journal of the new rate scale that collectors (employers, pension funds) will have to update this new information, within two months. Until then, you risk having to pay more tax than with a revalued grid.