Despite causing a temporary increase in net salaries and pensions, the government has acknowledged that the intention is to bring monthly tax withholdings more closely in line with actual tax liabilities, reducing the usual gap that results in refunds.

The IRS reduction plan totals €500 million and will be applied through lower monthly tax withholdings, offsetting the excess taxes withheld from January and July by significantly reducing the amount deducted from salaries and pensions for August and September. In October, a new set of tables will then raise the deductions again, although less sharply than in July.

According to tax experts, the tax relief provided over August and September may surpass the necessary correction, potentially leading to excess amounts withheld in the first quarter of the year.

Luís Leon, tax expert and founder of the consulting firm Ilya, explained that, for example, a worker earning a gross monthly salary of €1,136 will not have to pay IRS in August and September, but under a normal table, they should still be paying about €3 per month. “In order to correct €42 of overpaid tax from the first half of the year, the government is essentially refunding €180”, he warned. There will be a notable impact when reconciling taxes in 2026, which could drastically reduce expected funds or even result in taxpayers owing money.

“My advice is”, he suggested, “spend €6 and save the rest”.

“The refund in 2026 may not match those of previous years”, Cláudia Reis Duarte, Secretary of State for Tax Affairs, confirmed this potential impact. Still, she emphasised “that’s a good thing”, because people will receive the money in advance, rather than waiting for the refund. The goal, she added, is to align the tax deducted throughout the year with the final tax liability.

A similar model was applied in 2024, with lower deductions applied in September and October, resulting in widespread surprise at the low refunds in 2025.

Paula Franco, president of the Order of Certified Accountants, echoed this warning in statements to SIC. “Taxpayers were caught off guard by the refund amounts, forgetting that in September and October they had received much more net salary.” This year, the scenario may repeat itself, perhaps worsening the drop in refund values.

These new tables are scheduled to be applied by employers starting with August salaries, but the government is allowing adjustments to be made up until December, in case of delays. The same rule applies to pensions processed by Social Security, which may not be updated in time for the payment on August 8.

Simulations by the PwC for JN illustrate the short-term effects of the changes: a single, childless worker earning €1,500 see their net salary rise from €1,149 (in July) to €1,327 (in August and September), but it will fall again to €1,154 in October – just €5 more per month than before the adjustment.

For those earning a gross salary of €3,000, there will be a net gain of €610 in the two middle months, but in October, this increase will shrink to €12 per month. The conclusion is clear: August and September will be months of exceptional relief, but taxpayers should prepare for unpleasant surprises in their 2026 income tax returns.