Tax & Rates

Dutch income tax 2027: higher labour credit, limited inflation correction, more for higher incomes

Updated: 15 september 2026 Holdwise editorial team Income tax Labour tax credit Tax Plan 2027

Tax credits are discounts on the tax you owe, and the labour tax credit is the largest. It depends on your income from work: it climbs to a maximum and then phases out. The cabinet uses this credit in 2027 to protect middle incomes, and pays for it by limiting the yearly inflation correction of the brackets and by letting higher incomes have more.

Short answer

Dutch income tax in box 1 has three brackets: 35.75% up to €38,883, 37.56% up to €78,426 and 49.5% above that (2026). The rates stay the same in 2027. The changes are in the credits and the thresholds. The 2027 Tax Plan sets the rates at 36.23% up to €39,247 and 38.16% up to €78,426. The labour tax credit (arbeidskorting), a discount for everyone who works, rises by €173 at every point to a maximum of €5,929. The inflation correction of the brackets and credits is applied at 48% (factor 1.01248), and the 49.5% threshold is frozen at €78,426, which is how higher incomes pay more. Holdwise explains the three goes and what they mean for an employee, a freelancer and a director-shareholder.

Status: Proposed on Budget Day. This measure is part of the 2027 Tax Plan the cabinet submitted on 15 September 2026. The lower house votes on 12 November 2026, the senate around 16 December 2026. Every measure in one table: Budget Day 2026 and the Dutch 2027 Tax Plan.

The labour tax credit

The credit has four stretches. At a low income it climbs fast, at about €46,000 it reaches the maximum (2026: €5,685; 2027: €5,929), and above the phase-out point (2026: €45,592; 2027: €47,834) it drops by 6.51 cents for every extra euro, until it reaches zero (2026: €132,920; 2027: about €138,900). That phase-out works as a hidden tax: anyone in the phase-out effectively pays 38.16% plus 6.51% over every extra euro in 2027. For an entrepreneur the profit after deductions counts as income from work; for a director-shareholder the salary from the company.

Income from work	Labour tax credit 2026	2027
€30,000	about €5,400	about €5,600
€45,000	€5,685 (maximum)	about €5,900
€58,000 (customary salary)	about €4,900	about €5,270
€100,000	about €2,140	about €2,530
€140,000 and above	€0	€0

The limited inflation correction

Every year the tax office raises the bracket thresholds, the credits and dozens of other amounts by the inflation rate. That factor is called the table correction factor (tabelcorrectiefactor); for 2026 it was 1.034, so every threshold rose 3.4%. For 2027 the cabinet applies 48% of the correction: every threshold rises 1.248% (factor 1.01248). The first threshold becomes €39,247, against about €39,900 under a full correction. The 49.5% threshold is frozen completely at €78,426. Someone earning €80,000 whose salary grows 2.6% has about €2,000 more in the top bracket than under a full correction: over €200 of extra tax a year. That works through every bracket and every credit, and it adds up year after year. The treasury gains about €1.5 billion in 2027 and €3.4 billion structurally. The money goes to defence.

Higher incomes pay more

The tools are now known: the 49.5% threshold is frozen at €78,426, the inflation correction is limited to 48%, and the elderly credit drops €100 to €1,993. For a director-shareholder on the customary salary of €58,000 the effect is modest and the higher labour tax credit (€5,270 in place of €4,900) more than covers it; for anyone with a salary of €120,000 it is a few hundred euros a year extra. A bonus planned anyway may work out better in 2026.

What it means for you

A higher labour tax credit shows directly in net salary, because the employer settles it monthly in payroll. A freelancer sees it in the 2027 tax return or a lower provisional assessment. A director-shareholder on €58,000 is in the phase-out: about €5,270 of credit in 2027 against €4,900 in 2026, so about €370 more. Against that, the second bracket rate becomes 38.16% and the top threshold stays at €78,426. The wealth planner 2027 uses the figures from the 2027 Tax Plan and counts the credits per year. The rate tables are in the DGA salary in 2027.

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This article is part of Doing Business in the Netherlands, the complete 2026 guide.

Frequently asked questions

What is the Dutch labour tax credit? +

A discount on income tax for everyone with income from work: salary, business profit or salary as a director-shareholder. In 2026 at most €5,685, phasing out from €45,592; in 2027 at most €5,929, phasing out from €47,834 with 6.51%.

Do the Dutch income tax rates change in 2027? +

The 2027 Tax Plan sets 36.23% up to €39,247, 38.16% up to €78,426 and 49.5% above. The top threshold is frozen and the other thresholds follow only 48% of inflation.

Who pays for the higher labour tax credit? +

Higher incomes, through the frozen 49.5% threshold of €78,426 and the 48% inflation correction; pensioners through a €100 lower elderly credit. Source: 2027 Tax Plan of 15 September 2026.