Budget 2026: Major Tax Reform to Boost Family Incomes: An Explainer

Malta is set to roll out a significant overhaul of its income tax system for families, introducing higher tax-free thresholds and broader tax brackets over the next three years. The reform, announced as a central measure in Budget 2026, aims to ease the financial burden on parents and married couples raising children. By 2028, the initiative is expected to leave €160 million in the hands of families across the country, delivering meaningful long-term savings for thousands of households.

Key Highlights

• Implementation: 2026–2028

• Goal: Higher tax-free income thresholds and wider lower tax brackets for parents

• Top tax rate: 35% remains unchanged for income above €60,000

1. Parents with One Child

• Beneficiaries: ~23,750 parents

• Tax-free income: Increases to €18,000 by 2028

• Rates (2028):

  • 15% on income €18,001–€28,000

  • 25% on income up to €60,000

• Savings: Up to €3,600 by 2028, and potentially €113,000 over 23 years

2. Parents with Two or More Children

• Beneficiaries: ~29,300 parents

• Tax-free income: Increases to €30,000 by 2028

• Rates (2028):

  • 15% on next €12,000

  • 25% on income up to €60,000

• Savings: Up to €10,000 by 2028, and potentially €257,000 over 25 years

3. Married Couples with One Child

• Beneficiaries: ~2,400 families

• Tax-free income: Increases to €22,500 by 2028

• Savings: Up to €2,175 by 2028, and potentially €65,000 over 23 years

4. Married Couples with Two or More Children

• Beneficiaries: ~5,000 families

• Tax-free income: Increases from €29,500 (2026) to €37,000 (2028)

• Savings: Up to €6,000 by 2028, and potentially €150,000 over 25 years

Overall Impact

The reform will benefit tens of thousands of families, especially those with children, by expanding lower tax brackets and delaying the point at which higher rates apply. The 35% top rate remains, but will affect a smaller share of income for most households.

Gerald Fenech

Sports Editor
Veteran Journalist