Indexation of tax brackets: what changes for your 2026 income

As every year, the tax authorities index the personal income tax brackets. This automatic mechanism slightly changes the tax thresholds and certain exempt amounts.

What indexation changes

Indexation adjusts the tax brackets, the tax-free allowance and a range of caps and flat-rate amounts to inflation. Its aim is to prevent a merely nominal rise in income from pushing a taxpayer into a higher bracket.

Why this matters particularly to directors

For directors who pay themselves partly in dividends, director's fees or benefits in kind, this adjustment belongs in year-end planning rather than being discovered when the return is filed. The best balance between salary, benefits and dividends must be recalculated every year.

• Review the director's salary level in light of the new thresholds.
• Check benefits in kind (car, housing, equipment) whose flat-rate values change.
• Coordinate the dividend decision with your personal tax situation.

A reminder: how personal income tax is calculated

Personal income tax is progressive: taxable income is split into brackets, each taxed at a higher rate than the previous one. Part of the income, the tax-free allowance, escapes tax. Municipal surcharges, whose rate depends on where you live, are added to the federal tax. That is why two directors on the same gross salary do not necessarily pay the same tax.

The effect on withholding tax and advance payments

Indexation also feeds into the payroll withholding tax tables applied each month to salaries. For the self-employed trading in their own name and for directors whose withholding is insufficient, advance payments remain the main way to avoid a tax surcharge: their amount must therefore be recalculated whenever brackets and income change.

Salary, benefits, dividends: the annual equation

There is no ideal split that works for everyone. Salary is subject to progressive tax and social security contributions, but it is deductible for the company and forms the basis of social rights. Dividends bear a final withholding tax, with reduced regimes for some small companies under conditions, but they can only be paid out of taxed profit. Benefits in kind are valued on a flat-rate basis. Indexation shifts each of these levers slightly.

How we work with you

1. 1.
   Take stock of the current year

   Salary already paid, benefits, estimated company profit.

2. 2.
   Simulate several scenarios

   More salary, more dividends, or something in between, with their full tax and social security cost.

3. 3.
   Decide before year-end

   Adjust the final salary payment, advance payments and the dividend proposal to the general meeting.

We run this simulation with our clients before the financial year closes, so that the pay decision is taken with full knowledge of the facts.