Spanish income tax 2026: bands, allowances and withholding

The income tax scale: a state portion and a regional portion

Income tax on employment income is calculated by applying two progressive scales to the general taxable base: the state scale, which is the same throughout the common tax territory, and the scale of the region where you live. Each band only taxes the part of the base that falls within it, so earning more never leaves you worse off in net terms because you move into a higher band. The state scale, unchanged in 2026, is as follows:

The Community of Madrid's scale is one of the lowest in Spain: 8.5% up to €13,362.22; 10.7% up to €19,004.63; 12.8% up to €35,425.68; 17.4% up to €57,320.40, and 20.5% above that. Adding both scales together, a Madrid resident with a taxable base of €30,000 has a marginal rate of 27.8%, and the combined top rate is 45%, compared with 47% on the reference scale and higher figures in other regions.

• Up to €12,450: 9.5%.
• €12,450 to €20,200: 12%.
• €20,200 to €35,200: 15%.
• €35,200 to €60,000: 18.5%.
• €60,000 to €300,000: 22.5%.
• Over €300,000: 24.5%.

From gross salary to taxable base

The starting point is gross employment income: your annual gross salary, including extra payments and benefits in kind. From that figure you subtract the employee's social security contributions, which in 2026 total 6.50% of the contribution base on a permanent contract (4.70% common contingencies, 1.55% unemployment, 0.10% vocational training and 0.15% for the intergenerational equity mechanism). A further €2,000 is then deducted as other expenses, with higher amounts for workers with disabilities.

Lower salaries also benefit from the employment income reduction, which is calculated on net income, that is, gross pay less contributions:

• Net income up to €14,852: €7,302 reduction.
• Between €14,852 and €17,673.52: €7,302 less 1.75 for each euro above €14,852.
• Between €17,673.52 and €19,747.50: €2,364.34 less 1.14 for each euro above €17,673.52.
• From €19,747.50: no reduction.

The personal and family allowance

The personal and family allowance is the portion of income considered necessary to cover basic needs and which is therefore not taxed. It is not deducted from the base: tax is calculated on the base and then the tax corresponding to the allowance is subtracted, applying the first bands of the scale. The state personal allowance is €5,550, rising by €1,150 from age 65 and by a further €1,400 from age 75. In Madrid, the regional personal allowance is €5,956.65.

For children under 25 who live with you and have income of no more than €8,000, the state allowance is €2,400 for the first, €2,700 for the second, €4,000 for the third and €4,500 for the fourth and subsequent children, plus €2,800 for each child under three. In Madrid the figures are €2,575.85, €2,897.83, €4,400 and €4,950. If both parents file separately, each applies half. There are also allowances for parents over 65 living with the taxpayer and for disability.

Full example: €30,000 gross in Madrid

A single employee with no children, a permanent contract and a gross annual salary of €30,000 pays €1,950 in contributions, so their net income is €28,050. After deducting the €2,000 of other expenses, the taxable base is €26,050; there is no employment income reduction because it exceeds €19,747.50.

The state tax is €2,463: €2,990.25 from applying the scale to the base, less €527.25 for the €5,550 allowance. The Madrid regional tax is €2,135.02. In total they pay €4,598.02 in income tax, an average rate of 15.33% of gross salary, even though their marginal rate is 27.8%.

How your employer calculates payroll withholding

Your employer does not apply your region's scale, because withholding is the same throughout the common territory. It uses its own withholding scale of 19%, 24%, 30%, 37%, 45% and 47% in the same bands as the state scale, which is equivalent to doubling the state scale with a 47% cap. On the withholding base, calculated in the same way as the taxable base, it obtains a first amount; it subtracts the amount corresponding to the personal and family allowance and divides the result by annual pay. The resulting rate is truncated to two decimal places and applied to every payment, including extra ones.

In the previous example, the first amount is €5,980.50 and the allowance amount is €1,054.50, so the withholding is €4,926 and the rate is 16.42%. With 14 payments of €2,142.86, each payslip carries €351.86 of income tax, and the 12 ordinary ones also carry €162.50 in contributions. There are two safeguards: there is no withholding if pay does not exceed a threshold that depends on your family situation, and for salaries up to €35,200 the withholding cannot exceed 43% of the difference between the salary and that threshold. On contracts of less than a year, the minimum rate is 2%.

• No children, general situation: no withholding up to €15,876; with one child, €16,342; with two or more, €16,867.
• Spouse with annual income of no more than €1,500: €17,197 with no children, €18,130 with one and €19,262 with two or more.
• Single-parent family: €17,644 with one child and €18,694 with two or more.

Form 145 and adjustments during the year

Form 145 is the document you use to tell your employer about your family situation, the children and parents who live with you, any disability, court-ordered maintenance or child support payments, and payments on a loan for a main home bought before 2013. If you do not submit it, your employer calculates withholding without family allowances. Any change must be reported within ten days and is taken into account in payslips prepared at least five days later.

When circumstances change, your employer makes an adjustment: it recalculates the rate with the new details and offsets what has already been withheld in the remaining payslips. This is common after a pay rise, the birth of a child or the extension of a temporary contract. You can also ask in writing for a higher rate than the one calculated, which is useful if you have other income and prefer not to pay when you file.

The minimum wage credit: why the minimum wage pays no income tax

The 2026 minimum wage is €1,221 a month over 14 payments, €17,094 a year. To keep it tax-free, there is an employment income credit, updated for 2026, of €590.89 for those who do not exceed that figure, which falls by 20 cents for each additional euro until it disappears from €20,048.45. It only applies if you have no other income, excluding exempt income, above €6,500.

This credit is not taken into account in withholding, only in the annual return. That is why someone earning exactly the minimum wage has 3.06% withheld, about €523 a year, and in their return their tax falls to zero and everything is refunded. On €18,500, withholding is 6.09%, about €1,127, and the final tax is €866 after applying a €309.69 credit, leaving about €260 to be refunded.

Why your return shows an amount to pay or a refund

The return compares the actual tax for the year with the amount withheld. In Madrid, because the regional scale is lower than the reference scale used for withholding, the normal result for an employee with a single payer is a small refund: about €328 on a gross salary of €30,000, €591 on €45,000 and €748 on €60,000. These are the most common reasons the result changes:

• Two or more payers in the year: each employer withholds as if it were your only income and applies full allowances, so you usually end up paying. You must file from €15,876 if the second payer exceeds €1,500.
• Changes in circumstances not reported on form 145, such as a separation or a child no longer qualifying for the allowance.
• Other income without enough withholding: rental income, gains on selling funds or shares, or self-employed work.
• Reductions and credits not reflected in payroll: pension plan contributions, donations, the minimum wage credit or Madrid's regional credits, such as those for renting a home or the birth of a child.
• With a single payer, you are not required to file if your employment income does not exceed €22,000, although it may be worth doing so if you are due a refund.