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Swedish government promises tax cuts for workers and pensioners next year

Sweden's government has announced plans to cut income tax, as well as tax on pensions and ISK accounts, a type of investment savings account.

Published: 5 September 2024 12:57 CEST
Swedish government promises tax cuts for workers and pensioners next year
Finance Minister Elisabeth Svantesson at a press conference on Thursday. Photo: Claudio Bresciani/TT

The new proposals will be part of the government’s coming budget, which it hopes will help improve the finances of Swedish households after years of inflation.

“This will make life easier for Swedish households,” finance minister Elisabeth Svantesson told a press conference on Thursday, while adding that the tax cuts will also help kickstart the economy.

“A lot of this will go towards consumer spending,” she said.

The government measures include higher tax cuts for workers, as well as lower tax for pensioners, at a cost of around 13.5 billion kronor next year.

Anyone earning over 16,000 kronor will benefit from the proposal, while the effects of the change will be less noticeable for people with monthly salaries of 40,000 kronor and above.

“The average worker will see their tax payments cut by around 2,600 kronor a year,” Sweden Democrat finance spokesperson Oscar Sjöstedt said.

According to the government, the cuts are aimed at people with average and below average incomes. However, due to the effect of former changes to income tax being adjusted for inflation, as well as the limit for state tax being raised, those with the highest incomes will actually see the largest cut to their annual tax bill in terms of kronor.

According to tables released by the government, people earning around 60,000 kronor a month and above will see a cut of around 10,000 kronor a year from next year.

Tax cuts for pensioners will also increase, to ensure that they don’t end up paying more in tax than people in work. This means that the average pensioner will see a 1,400 kronor cut to their tax bill from next year, if the proposed budget is accepted in its current form.

The third proposal in the new budget is the implementation of a tax-free limit on ISK accounts, which can be used to invest in funds or shares. From next year, the first 150,000 kronor on these accounts will be tax free, rising to 300,000 kronor in 2026.

For the average person with savings in an ISK account, this means 750 kronor less tax next year.

This is expected to cost the state 4.4 billion kronor in 2025, rising to 7 billion kronor in 2026.

The budget proposal, negotiated by the government and the Sweden Democrats, will be presented in its entirety on September 19th.

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CALCULATOR: How much will you gain from the boost to Sweden’s employment tax credit

Sweden's government has announced plans to increase the employment tax credit, a rebate given to everyone who has a job. Here's how much you stand to gain.

Published: 6 September 2024 14:50 CEST
CALCULATOR: How much will you gain from the boost to Sweden's employment tax credit

If you have a job in Sweden and do not depend on benefits for your income, you qualify for the jobbskatteavdraget, or employment tax credit, a tax reduction brought in by the government led by the Moderate leader Fredrik Reinfeldt in 2007 to reward those in work. 

The tax was a key part of that government’s focus on the arbetslinje, or work line, the idea behind which is that people should always be better off if they have a job than if they live on benefits. 

As a percentage of income, those on the lowest salaries get the biggest tax reduction, with the maximum tax reduction next year set at 10,633 kronor. 

The government broke down how people in different income brackets will be affected by the increase in jobbskatteavdrag in a document posted alongside the press release.  

The column on the impact of “indexation” or indexeringen, includes the impact of three other tax reductions or thresholds which are adjusted each year in line with developments in salaries and inflation. These include a rise in the so-called skiktgräns, the point at which earnings qualify for state income tax, increases to the so-called grundavdrag, another tax reduction, and also the indexation of the employment tax reduction itself.

In 2024, the government paused the rise in the skiktgräns, but in 2025 it will once again rise with the consumer price index, with the government expecting the threshold to rise from 51,275 kronor a month to 53,590 kronor a month. 

So how much do you stand to get? 

  • Unemployed. If you have had no income from employment at all you are not eligible for the jobbskatteavdrag, and would have received no tax reduction in either 2024 or 2025.
  • Low income. People on incomes of 200,000 kronor a year will see the increase in the tax credit alone reduce their tax by 106 kronor a year compared to what they paid in 2024, and their tax reduced by 716 kronor once indexation is included. 
  • Median and average. People earning the median salary of 462,000 per year will see their tax bill decline by 3,671 kronor, 3,049 kronor of which will come as a result of the increase in the employment tax reduction alone. People earning the average salary of 517,200 kronor will see their tax bill fall by 4,464 kronor compared to what they paid in 2024, with 3,198 kronor coming from the increased employment tax reduction. 
  • High incomes. The biggest increase in the tax reduction will go to those earning between 1 million and 1.5 million kronor a year, with their taxes reducing by 10,633 kronor, the lion’s share of which is coming from the impact of indexation, with only 3,197 kronor coming from the increased employment tax reduction.  

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