Box 1: Income from work and home
Box 1 taxes your business profits and any income from your own home. You pay tax in brackets so the rate increases on higher incomes. You reduce your taxable income with deductions such as business deductions or mortgage interest. The amount that then remains forms the basis for the brackets. As a result, the tax matches your actual income rather than your turnover. In 2026, there are three brackets that together determine how much tax you pay.
Tariffs 2026
These box 1 tax rates apply if you have not yet reached the state pension age (AOW age) in 2026. If you reach that age in 2026 or earlier, please consult the corresponding AOW rates.
| Tax bracket | taxable income from work and home | Rate |
|---|---|---|
| 1 | Up to and including €38,883 | 35,75% |
| 2 | More than €38,883 up to and including €78,426 | 37,56% |
| 3 | More than €78,426 | 49,50% |
Source: Tax authorities: tax bands and rates. Only income within a higher bracket is taxed at that higher rate.
Tariffs 2025
For those who have not yet reached state pension age by 2025, the first bracket applies up to and including €38,441, with a rate of 35.82%. The second bracket ranges from €38,442 to €76,817, with a rate of 37.48%. The third bracket applies from €76,818 upwards and has a rate of 49.50%. The first bracket also includes social security contributions, which is why this percentage is higher than the income tax rate alone. You only pay the top rate on the portion of your income that exceeds the threshold for the third bracket.
| Tax bracket | Taxable income | Rate |
|---|---|---|
| Bracket 1 | up to and including €38,441 | 35,82% |
| Bracket 2 | €38,442 to €76,817 | 37,48% |
| Bracket 3 | from €76,818 | 49,50% |
How does the tax system work?
The tax system works with three boxes, each of which taxes a different type of income. Box 1 is about work and home and includes your profit from business. Box 2 deals with income from a substantial interest such as shares in your own private limited company. Box 3 looks at savings and investments and taxes your assets. You calculate the tax for each box separately and add it up. Then tax credits are deducted so you pay less. As a result, the system works the same way for everyone regardless of the source of income.
Sample calculation
Fictional example: your taxable Box 1 income is €50,000 in 2026 and you have not yet reached the state pension age. This is not a calculation starting from a turnover of €50,000.
- First bracket: €38,883 × 35.75% = €13,900.67.
- Second bracket: €11,117 × 37.56% = €4,175.55.
- Total: €18,076.22 before tax credits and rounding of the assessment.
Tax credits and any separate Zvw (healthcare insurance act) contribution also help determine what you ultimately pay. Do you want to go from turnover and costs to your final self-employed tax? Read income tax for the self-employed.
Tax credits
Which tax credits you receive and how much they amount to depends on your income and personal situation. The general tax credit can drop to zero. The same income bases are not always used for the employed person's tax credit and the general tax credit. Check the conditions and calculations for 2026.
Difference between payroll tax and income tax
Payroll tax is a withholding tax on income tax. An employer withholds payroll tax; during the tax return, this is offset against the calculated tax. If you have salary in addition to your business, you can therefore have both. For your business, you can make advance payments via a provisional assessment. The tax return determines the final settlement.
Box 2: Substantial interest
Box 2 relates to income from a substantial interest, such as dividends or capital gains arising from a holding of at least 5% in a company. You do not need to work for that company yourself. No Box 2 tax is payable on the business profits of a sole trader.
| Tax bracket | taxable income from a substantial interest | Rate |
|---|---|---|
| Bracket 1 | Up to and including €68,843 | 24,5% |
| Bracket 2 | Above €68,843 | 31% |
Pricing
The rate in box 2 has two brackets. On the part up to €68,843, you pay 24.50%. On the excess, you pay 31%. The division ensures that smaller dividend distributions are taxed lower while higher distributions are taxed more heavily. The rates will remain the same in 2026.
Box 3: Savings and investments
Box 3 concerns the return on savings and investments. The tax-free allowance in the flat-rate calculation for 2026 is €59,357 per person, or €118,714 with a fiscal partner.
Percentages for the 2026 provisional assessment:
| Section | Percentage |
|---|---|
| Bank balances | 1,28% (provisional) |
| Investments and other assets | 6,00% |
| Debts | 2,70% (provisional) |
| Tax on calculated Box 3 income | 36% |
Read the official calculation for 2026. The bank and debt percentages will be finalised later.
Pricing
If your actual return is lower than the deemed return, you can report this using the counter-evidence scheme. Keep your return data for this purpose. The provisional assessment still calculates with deemed returns; actual return is assessed after the end of the year. Read what the Tax and Customs Administration understands by real return.
