Income tax in 2021: what will change for you?

Global income tax changes 2021

Last year was a disastrous year for the Dutch economy. A year in which companies were kept afloat through all kinds of support measures. Eventually that bill will start to fall on the taxpayer. Will that already be the case next year in income tax? Jan the Taxman finds out for you.

The income tax is divided into three income boxes. These will be highlighted further below.

Box 1 - Income from work and home

Box 1 contains the income from work and home. These include: wages, profits from business, results from other activities, imputed income from your own home and periodic payments. The rate in this box is progressive, meaning you pay more tax if you earn more. So there is no flat tax (one percentage).

*This rate includes not only income tax but also national insurance contributions.

 Compared to 2020, little is changing in the rate structure of Box 1. Some minimal adjustments have been made to the rates and the length of the brackets, but the average taxpayer will not really feel this in the wallet.

Box 2 - Income from substantial interest

In this box, income from substantial interest is taxed. These are benefits you derive from shares, for example. These benefits are also called "dividends. The rate in box 2 seems much lower than box 1, but as you know, the legislature hardly gives away presents. Again, this is not the case, because the company from which you obtain the benefits also already has to pay corporate tax on the profits. As a result, the tax burden of box 2 is almost the same as box 1.

The box 2 rate next year will be 26.90%, which represents an increase compared to previous years (25% in 2019; 26.25% in 2020). The reason for this is the intended decrease in the corporate tax rate. But the cabinet has decided this year not to pursue this decrease. So this means that the rate for Box 2 income will increase. This may make it more favorable to have a business in Box 1, but this depends on your personal circumstances.

Box 3 - income from savings and investments

This box taxes income from savings and investments and has been under fire for several years. This is because the box assumes a notional return that is taxed. Only this return has diverged from the actual return for years, causing taxpayers to perceive this box as unfair. The legislature has therefore chosen to reform box 3 in 2021. The biggest reform amounts to the significant increase in the tax-free wealth that will spare "small savers. The tax-free wealth was €30,846 and will go up to €50,000. If you have a tax partner, you and your partner are allowed to have €100,000 in tax-free assets.

Box 3 belast uw vermogen. Als je bijvoorbeeld een tweede huis hebt of een spaarrekening, dan kan het zo zijn dat dit wordt belast in deze box. Het tarief in deze box bedroeg tot en met dit jaar 30%, maar in 2021 zal dit tarief worden verhoogd naar 31%.

Uw inkomen zal als volgt worden belast: 

Conclusion - What will change?

In box 1 and 2, not much will change overall in the coming tax year. Joe with the hat' will therefore feel little effect of these changes. However, box 3 may turn out to be more advantageous because the tax-free capital will be significantly increased. Whether this is actually the case always depends on personal circumstances.

Ergo: taxpayers will not foot the bill in income tax next year for the cabinet's corona expenses. When the bill will be paid, however, is still unknown.

After reading, are there any uncertainties or do you have any questions? Jan de Belastingman is happy to help you in the chat! Ask your question and you'll get an answer right away! What are you waiting for?