In regard to the Labour Tax Credit the Netherlands will change the labour tax starting 2026. By lowering income thresholds and indexing them to the minimum wage, the Dutch government is supporting part-time employees and low-income earners. The credit is applied as a deduction from their income tax, so the net salary increases.
☰ Table of Contents
What Is Labour Tax Credit in the Netherlands?
The Labour Tax Credit [Arbeidskorting] in the Netherlands is a tax benefit for anyone who earns income from work (employment or self-employment). It is is designed to make working more financially attractive. It reduces the amount of income tax and social security contributions employees pay, meaning employees can keep more of their earnings.
In summary the Labour Tax Credit in the Netherlands is set in place to encourage people to work and to ensure that working is more rewarding than not working.
The amount of Labour Tax Credit in the Netherlands depends on your income:
- At lower incomes, the credit increases as employees earn more.
- At middle incomes, it reaches a maximum.
- At higher incomes, it gradually decreases.
Change in Labour Tax Credit Netherlands 2026
The income thresholds for the credit in 2026 will be lowered in the Netherlands and the link to minimum wage will be adjusted. Until 2025, the credit was linked to income growth and the statutory minimum wage.
Starting 2026, it means part-time employees and those earning below the minimum wage will receive a higher labour tax credit, boosting their net income. For many employees, this could mean extra money in their pocket each month, without any change in working hours.
For full-time employees earning above the minimum wage, the changes will be less noticeable, but the tax credit system remains progressive.
The credit is applied as a deduction from the income tax, so the net salary increases. Employees with a minimum wage will see an increase in their net income between EUR 10 to EUR 20 per month, depending on hours worked.
Employees earning a modal income around EUR 3,875 per month will have their net income increased by EUR 34.67 more per month, and those earning twice the modal income will see an increase of EUR 47.17 per month.
Impact Labour Tax Credit on Dutch Employment
These changes in the Labour Tax Credit 2026 in the Netherlands are designed to:
- Encourage labour participation: Working part-time becomes more financially attractive.
- Support low-income households: Extra tax relief helps offset living costs.
- Simplify the system: Linking credits to minimum wage, making it easier to understand.
What Should Employers and Employees Do?
- Employees: Check your payslip in early 2026 to see the impact of the new credit.
- Employers: Payroll should update tax tables and thresholds in their payroll systems for 2026, to process the change automatically. You might want to communicate these changes to staff, especially those in flexible or part-time roles.
