Portugal’s draft State Budget for 2027 includes measures expected to affect household finances through changes to income tax, wages, pensions, housing assistance and family benefits. While some measures could increase disposable income, higher living costs and the planned return of tuition fee increases may offset part of the gains.
The budget must still pass through parliament before receiving final approval from the President of the Republic.
Income tax thresholds to rise
One of the main measures is a 3.88 per cent adjustment to personal income tax (IRS) brackets. The proposed nine brackets retain rates ranging from 12.2 per cent to 48 per cent, with the highest rate applying to taxable annual income above €89,995.
The adjustment is intended to reduce the impact of inflation and wage increases on taxpayers. However, the update is below the 4.5 per cent average wage increase targeted under the agreement on wage growth and economic development.
The Government also plans to adjust the specific deduction available to workers and pensioners, although the amount has not yet been confirmed. An exemption for certain productivity and performance bonuses, profit-sharing payments and balance-sheet gratuities will remain available up to 6 per cent of annual basic salary, provided employers meet the required wage growth conditions.
Minimum wages and pensions
The national minimum wage is set to increase from €920 to €970 a month in 2027, a rise of €50. In public administration, the proposed minimum basic salary will rise from €934.99 to €995.51, reflecting an increase of 2.3 per cent or €60.52.
Pensions are also expected to rise through the regular annual adjustment mechanism, which takes account of inflation and economic growth. Current estimates suggest increases of around 3 per cent for pensions of just over €1,000 a month or less, although the final figures depend on the economic data.
Pensioners receiving up to €1,611.39 a month are due to receive an extraordinary payment in December. The supplement will range from €100 to €200, depending on the pension amount.
The Solidarity Supplement for Older People is expected to increase from €670 to €720 a month, supporting older people on low incomes. The Government aims to raise the reference amount to €870 by 2029.
Family benefits and parental leave
Spending on child benefit is forecast to rise by €59.5 million in 2027, reflecting higher average payments and an estimated 1.1 per cent increase in beneficiaries.
The budget also allocates €1.452 billion to parental benefits, an increase of €349.1 million, or 31.7 per cent, compared with the forecast expenditure for 2026. The increase comes as parliament considers extending fully paid initial parental leave to 180 days. The final cost will depend on the rules adopted for sharing leave between parents.
Housing support continues
Landlords in the moderate-rent tax scheme will continue to benefit from a 10 per cent income tax rate on eligible rental income, rather than the standard 25 per cent rate. The scheme covers rents of up to €2,300 a month and applies to eligible contracts through the end of 2029.
Tenants will benefit from a higher maximum income tax deduction for rent, increasing from €900 to €1,000 in 2027. The ceiling could reach €1,100 for taxpayers with lower taxable incomes.
Young people aged up to 35 will continue to benefit from exemptions from property transfer tax and stamp duty when buying their first home. The maximum property value covered by the transfer tax exemption is expected to rise to €338,141.
The Government also plans to strengthen the Porta 65 rental support scheme for young people, although the budget does not specify the additional funding. Continuation of the public guarantee scheme for first-time buyers remains subject to a formal decision.
Tuition fees and transport costs
Tuition fees at public higher education institutions are set to rise again from the 2027/2028 academic year after a period of frozen charges. The maximum annual fee for bachelor’s degrees and higher professional technical courses, currently €697, will be adjusted in line with inflation. Certain professionally required master’s degrees will follow the same approach, while other master’s and doctoral programmes may be adjusted according to the cost of providing courses.
The proposal contains no direct changes to fuel taxes, although the Government expects revenue from fuel-related taxes to increase by 5.2 per cent, adding €186 million. The future of the existing fuel tax discount remains unclear.
The budget also retains the diesel vehicle surcharge under the Single Circulation Tax, while changing the payment schedule in 2027 ahead of a new system planned for 2028.
Finally, the Government intends to extend the Regressar programme for another year. The scheme supports Portuguese emigrants returning after at least five years abroad by exempting 50 per cent of eligible employment and business income from taxation for five years.
