Taxes, housing and tuition fees: 2027 budget measures impact family budgets in Portugal

The draft State Budget for 2027 (OE2027) sets out changes that will affect the disposable income of Portuguese households, from taxes on wages to social benefits and spending on housing and education.

Key measures include a new update of the IRS brackets, an increase in the national minimum wage and a strengthening of some social benefits. On the other hand, tuition fees in higher education are expected to start rising again from the next academic year.

In addition, the evolution of prices for essential goods may swallow up part of the tax savings.

The draft must still go through the parliamentary approval process before being promulgated by the President of the Republic.

One of the main measures is the update of the IRS bracket thresholds. The rates planned for 2027 remain, according to the budget proposal, at the levels presented by the Government in September, but the income limits from which each bracket applies will be higher.

The IRS table presented sets out nine brackets, with rates between 12.2% and 48%. The first covers annual taxable income of up to 8,666 euros, followed by a rate of 15.2% for the slice between that amount and 13,075 euros. In the next two brackets, which go up to 18,530 euros and 23,985 euros, the rates are 20.7% and 23.6% respectively.

From there, the rates rise to 30.6% in the bracket up to 30,538 euros and to 34.6% in the next, up to 44,762 euros. Income between 44,762 and 48,373 euros is taxed at 43.1%, while the slice between 48,373 and 89,995 euros is taxed at 44.6%. The top rate of 48% applies only to the portion of annual taxable income above 89,995 euros.

The upper and lower limits for each bracket have been updated by 3.88%, a percentage lower than the reference value set for wage increases in collective bargaining, which in the Tripartite Agreement on Wage Enhancement and Economic Growth, agreed in Social Concertation, aims for an average wage rise of 4.5% next year.

Because the brackets are updated by around 3.9%, all taxpayers stand to gain, taking into account the progressive nature of this tax.

The Government also plans to update the specific IRS deduction, which excludes a portion of workers’ and pensioners’ income from taxation, but the exact amount is still unknown, as it depends on the update of the Social Support Index (IAS).

The IAS is set by a ministerial order that fixes the value in force each year from 1 January, but it is usually calculated a few weeks earlier based on inflation and economic growth.

There is also a change targeting higher incomes: the additional solidarity rate of 2.5% will apply only to taxable income above 89,995 euros a year. For income over 250,000 euros, the 5% rate remains in place.

The proposal to exempt from IRS productivity bonuses, performance bonuses, profit-sharing and balance-sheet gratuities up to a limit of 6% of a worker’s annual basic pay also remains, provided the company meets the wage enhancement criteria laid down.

Workers earning the national minimum wage are set to move from the current gross 920 euros a month to 970 euros in 2027, an increase of 50 euros per month.

This figure is in line with the wage enhancement agreement reached in Social Concertation and represents a boost to the gross income of those on the minimum wage. The net amount will depend, among other factors, on each worker’s tax situation.

In the public administration, the proposal provides for a minimum salary update of 2.3% or 60.52 euros, raising the basic pay to 995.51 euros a month.

At present, the basic pay in the public administration stands at 934.99 euros.

Pensioners will in 2027 benefit from the regular indexation of pensions, calculated on the basis of inflation and growth in Gross Domestic Product (GDP). Although the final figure is not yet known, available data point to an increase close to 3% for pensions of just over 1,000 euros a month or less, covering most pensioners.

This update is expected to add 824 million euros to public spending next year.

Before that, in December, pensioners with pensions of up to 1,611.39 euros a month will receive an extraordinary supplement, paid automatically together with their pension: 200 euros for those receiving up to 537.13 euros, 150 euros for pensions above that amount and up to 1,074.26 euros, and 100 euros for pensions above that level and up to the defined ceiling.

The aim is to strengthen pensioners’ incomes, especially those on the lowest pensions, although the regular 2027 increase can only be confirmed once the final inflation and economic growth data are known.

Pensioners on the lowest incomes are among the beneficiaries of one of the social top-ups planned in the budget. The Solidarity Supplement for Older People (CSI) is expected to increase from 670 to 720 euros, a rise of 50 euros in the monthly reference amount.

The measure is designed to bolster the incomes of older people in situations of greater economic vulnerability. The Government is also maintaining its goal of raising this reference value to 870 euros by 2029.

Child benefit is also expected to see higher public spending, linked to indexation of amounts to inflation and the forecast increase in the number of beneficiaries.

The 2027 budget proposal states that spending on child benefit will rise next year by 59.5 million euros, "by comparison with the forecast outturn for 2026".

The Government explains the increase in the budget report by pointing to higher spending due, on the one hand, to "an increase in beneficiaries of around 1.1%" and, on the other, to "higher average amounts in line with the projected change in inflation".

On the rental market, there are changes with different impacts for landlords and tenants.

Landlords covered by the moderate rent tax regime will continue to benefit from an IRS rate of 10%, instead of the 25% previously applied.

The measure covers income earned up to 31 December 2029, in both new and existing contracts, but applies only to rents of up to 2,300 euros a month, the amount the Government set in September 2025 as a "moderate rent".

For tenants, the maximum IRS deduction on rents will increase from 900 to 1,000 euros in 2027. For taxpayers with lower taxable incomes, the ceiling may reach 1,100 euros. This change allows a larger share of spending on permanent housing to be offset against tax, within the applicable legal conditions.

Young people up to the age of 35 will continue to benefit from exemption from IMT property transfer tax and stamp duty when buying their first home, with updated exemption thresholds. The maximum value covered by the IMT exemption is expected to rise to 338,141 euros.

The Government also plans to reinforce the Porta 65 scheme, which supports young people renting a home, but gives no figures.

The continuation of the public guarantee scheme for the purchase of a first home is also described as likely, although, when presenting the budget, the finance minister clarified that a "formal decision" was still pending.

One of the measures that may mean an additional burden for families is the unfreezing of tuition fees in public higher education from the 2027/2028 academic year.

The current maximum fee for bachelor’s degrees and higher professional technical courses, set at 697 euros, is to start being updated in line with inflation.

The same rule will apply to certain master’s degrees that are required to work in a given profession or demanded by the relevant professional associations. For other master’s and doctoral programmes, the proposal states that updates should reflect the actual cost of providing the training.

This measure could raise annual expenses for households with children in higher education, especially when there are other associated costs, such as accommodation, transport and food.

The update of tuition fees had already been proposed by Luís Montenegro’s Government in last year’s State Budget, which envisaged raising the maximum fee for bachelor’s degrees to 710 euros, but the measure was eventually rejected during the detailed vote.

The budget provides for higher spending on parental benefits, reflecting expectations that eligibility conditions will be improved. The debate on extending the initial parental leave paid at 100% to 180 days could affect how these measures are implemented and how much they cost.

Spending on parental benefits is expected to increase by 349.1 million euros in 2027, reflecting "growth of 31.7% compared with the forecast outturn for 2026". The total budgeted amount comes to 1,452 million euros.