Wage Increases and Other Government Budget Plans for 2025
Wage Increases and Other Government Budget Plans for 2025
New income tax brackets and reduced expat benefits offer slight relief, but rising costs for healthcare, housing, and energy put pressure on households.
The Dutch government's 2025 budget outlines important changes that will affect taxes, wages, and public services. Prime Minister Dick Schoof's Cabinet plans to spend 457 billion euros, creating a budget deficit of 31.9 billion euros. Despite the shortfall, Finance Minister Eelco Heinen emphasised being cautious with spending to protect future prosperity. The budget includes changes to taxes, benefits, and public spending.
Income tax changes and salary impacts
In 2025, a new lower-income tax bracket will be introduced. Earnings up to 38,441 euros will be taxed at 35.82%, income between 38,441 and 76,816 euros will be taxed at 37.48%, and income over 76,816 euros will still be taxed at 49.50%. This means most workers will see a small increase in their pay. For example, someone earning an average salary of 3,433.68 euros per month will get about 42.91 euros more per month. However, the general tax credit will be reduced by 335 euros, which could lessen these gains for some people.
People earning minimum wage will see slight changes depending on their working hours. While most will see a small increase in their pay, those working fewer hours may see a small decrease. Overall, purchasing power will rise by only 0.7%, which is less than the 1.1% increase that was expected.
Expat tax break and housing
For expatriates, the popular expat tax break will be reduced from 30% to 27% in 2027, and the minimum income required to qualify will increase to 50,436 euros, making it harder for some to benefit from this tax break.
The government also plans to spend 5 billion euros on housing construction over five years, but only 317 million euros will be spent in 2025. The goal is to build 100,000 new homes each year to reduce housing shortages, but most of the funding will be delayed until 2030.
Benefits, public services, and inflation
The budget will impact benefits and public services. For example, the childcare subsidy won’t increase with inflation, meaning parents will have to pay more for childcare. Renters and students will also face challenges, as rent subsidies and student stipends will be reduced.
The government will spend a lot on public services, including 114.9 billion euros on social security, 114.6 billion euros on healthcare, and 53.4 billion euros on education, culture, and science. Defence will receive 19.4 billion euros, and justice and security will get 16.6 billion euros.
Cost of living changes
Train tickets will increase by 6%, but fuel taxes will stay at the reduced rates. Energy costs are expected to rise by 60 euros per household next year. Health insurance premiums will increase by 120 euros per year, but the deductible could be reduced to 165 euros, helping to lower costs for some.
In summary, the 2025 budget will bring changes that affect taxes, benefits, and the cost of living. Some people will benefit from tax cuts, but others may face higher costs, especially housing and healthcare.