Budget 2026 | Generous tax cut for parents is flagship measure

Malta’s income tax bands for parents and married couples with children will be overhauled over the next three years to leave more money in the pocket of people raising children. 

The progressive tax savings will start being felt next year with higher tax-free income thresholds and the widening of intermediate tax brackets across the board for parents.  

This key measure of Budget 2026 will leave €160 million in people’s pockets over the three-year span and effect thousands of families. The changes will apply also to families with one child. 

Parent computation with one child 

The changes for the estimated 23,750 parents with one child offer the most significant immediate-term savings for those earning more than €14,500.  

By 2028, the maximum tax-free income for this category will rise to €18,000. The tax rates for this group will be adjusted across the three years, culminating in a 15% rate applied to income between €18,001 and €28,000 and a 25% rate for income up to €60,000. Any income above €60,000 will pay 35% tax. 

The maximum tax saved for a family in this category will total €3,600 by the end of 2028. Based on the projected figures, one family could save up to €113,000 over a period of 23 years. 

Parent computation with two or more children 

The most expansive tax adjustments target the 29,300 parents with two or more children.  

By 2028, the minimum income threshold before tax is applied will be €30,000. The 15% rate will then be applied to the next €12,000 in income, followed by the 25% rate up to €60,000. Any income above €60,000 will pay 35% tax. 

Families in this category stand to gain the largest benefit, with a maximum tax saving of €10,000 over the three-year period. Over a 25-year span, the total tax savings for one family could reach €257,000. 

Married couple computations 

Married couples with one child, totaling around 2,400 families, will see their tax-free bracket increase to €22,500 by 2028.  

The maximum tax saving for this group is projected at €2,175 by the end of the third year, with a potential saving of up to €65,000 over 23 years.  

For the 5,000 married couples with two or more children, the tax-free threshold will climb to €37,000 by 2028, up from €29,500 in 2026. This group is projected to save up to €6,000 by 2028, with potential savings of €150,000 over 25 years. 

In all four categories, income exceeding €60,000 will continue to be taxed at the current 35% rate, but the bracket reductions mean this rate will apply to a smaller portion of the taxpayer’s overall income.