How the new tax reform affects your wallet

The first elements of the tax reform will be introduced from 2025, but several elements will not take effect until the following years. In addition to the tax reform, it will also become more financially attractive to work in the years around the state pension age.

The reform raises the employment deduction. And furthermore, Danes with incomes of DKK 618,400 to DKK 750,000 before labour market contributions (‘AM-bidrag’) will get a lower income tax. For Danes with an income of DKK 2.5 million before labour market contributions, an extra top-top-bracket tax of 5 percentage points is introduced.

The higher employment deduction will take effect from 2025, while the new income tax rates will take effect from 2026.

In the table you can see the total gain, which varies from DKK 1,200 to almost DKK 12,000, depending on your annual salary. If you have an annual salary of approximately DKK 2.75 million or more, you will have to pay more tax as a result of the top-top-bracket tax.

Here are the tax cuts

HUSK AT INDSÆTTE TABEL

How will the tax reform affect your pension savings?

If the agreement is implemented in its current form, as it is expected, pension savings will continue to be an attractive form of savings for all Danes. For a lot of people, the value of the tax deduction you will receive on your contribution to pension savings will be greater – or at least the same – as the tax you can expect to pay on the day your pension savings are to be disbursed.

For most people, everything will actually be just as before.

Here are the Government's tax cuts

• The ordinary employment deduction is increased from 10.65 per cent to 12.75 per cent. At the same time, the maximum employment deduction is raised to DKK 56,200. The increase will be introduced gradually in 2025 and fully implemented in 2026.
  
  
• The additional employment deduction for single parents is increased from 6.25 per cent to 11.5 per cent. At the same time, the maximum additional employment deduction for single parents is raised to DKK 44,900. The increase takes effect from 2025.
  
  
• In addition, a new intermediate, top and top-top-bracket tax will be introduced with effect from 2026:

1. A new intermediate-bracket tax of 7.5 per cent will be introduced in the income range of DKK 618,400 to DKK 750,000 before labour market contributions.
2. For annual salaries above DKK 750,000 before labour market contributions, a top-bracket tax of 7.5 per cent is to be paid.
3. A top-top-bracket tax of 5 percentage points will be introduced for annual salaries above DKK 2.5 million before labour market contributions.
   
   

• New extra employment deduction for seniors. A new extra employment deduction is introduced for seniors. The deduction is granted to all persons in employment with less than two years of age up to the state pension age and until reaching that age. The deduction means a tax relief of approx. DKK 3,800 per year from 2030, which is in addition to the mentioned increase in the ordinary employment deduction. The extra employment deduction for senior citizens will be introduced in 2026 and will be increased further in 2029 and 2030.
  
  
• The senior bonus is increased. The tax-free senior bonus, which is granted in the first and second years after the state pension age to persons who are in employment for at least 1,560 hours a year, is increased both in the first and second years after the state pension age. The increase entails an additional bonus of up to approx. DKK 13,600 and DKK 8,000 respectively, corresponding to an increase of the first-year bonus from DKK 45,415 to DKK 59,000 and of the second-year bonus from DKK 27,033 to DKK 35,000 in 2029. The senior bonus will be increased from 2026 and further from 2029.