In 2025, several changes will come into effect that affect taxes for both wage earners and pensioners. The new rules are designed to create economic incentives for work and improve financial conditions for older people. Here are the key updates:
Tax Relief for Work and Pension
1. Enhanced Earned Income Tax Credit
From 2025, the earned income tax credit and the increased basic deduction will no longer decrease with higher incomes, resulting in lower marginal tax for high-income earners.
2. Lower Tax for Older Employees
Wage earners who turn 67 during the income year will pay only 8% tax on employment income up to 342,000 SEK, including the increased basic deduction and the enhanced tax credit.
3. Increased Basic Deduction for Pensioners
Pensioners aged 67 or older will pay significantly lower taxes. The difference in net income may amount to about 1,900 SEK per month compared to younger pensioners, thanks to the higher basic deduction.
Economic Benefits of Working Longer
Continuing to work after age 66 offers several benefits:
- Higher Pension
Every additional 10,000 SEK in annual income increases the future pension by about 110 SEK per year for life. - Lower Employer Contributions
Employers pay only the age pension fee (10.21%) for employees who turn 67, compared to 31.42% for younger workers.
Tax on Pension and Combined Income
Combining pension with work provides a more favorable tax outcome, especially after age 67. However, if the income is high, state income tax may apply. To avoid this, you can:
- Reduce the Proportion of Pension Withdrawals
Withdrawing less of your public pension reduces the risk of exceeding the threshold for state income tax. - Use the Tax Agency’s Tools
Run a preliminary tax calculation to optimize the balance between salary and pension.
Key Thresholds for 2025
- State Income Tax
A 20% tax is levied on taxable income above 625,800 SEK, regardless of age. - Earning Cap for Pension Rights
The maximum pensionable income is 604,500 SEK.
Plan for a Better Pension
Working longer and delaying pension withdrawals offer significant financial benefits through both a higher pension and lower taxes. Want to know how your situation will be affected? Contact Revea for advice on accounting, tax, and pension!
Have questions about how the new rules affect you? Get in touch with Revea – we’re here to help you navigate financial matters!
