Personal Income Tax 2025: the most relevant changes for the 2026 season

The 2025 income tax return season —whose filing window runs from 2 April to 30 June 2026— brings changes that significantly affect owners of let property, the self-employed and investors. These are the most relevant changes to bear in mind before filing.

1. The reduction for letting a main home: new rules

The change with the greatest impact in the 2025 Personal Income Tax for property owners affects Article 23.2 of the Personal Income Tax Act (Law 35/2006), as amended by Law 12/2023 of 24 May on the right to housing. For main-home tenancy agreements entered into from 26 May 2023, the reduction is no longer the general 60%, but is structured in four tiers:

• 50%: the general reduction for all newly signed agreements within the scope of the Act.
• 60%: where, in the year before the new signing, there was a tenancy agreement over the same property and the new rent is at least 5% lower than the previous one.
• 70%: where the tenant is under 30 (or up to 35 in stressed residential market areas) or where the property is in a stressed area and is let for the first time.
• 90%: where the property is in an area declared a stressed residential market and the rent is reduced by at least 5% compared with the previous agreement.

For agreements signed before 26 May 2023, the 60% reduction under the previous rules is maintained. Correctly determining which percentage applies to each agreement requires reviewing the signing date, whether the property is in a declared stressed area, and how the rent has changed compared with earlier agreements over the same property.

2. The self-employed: third year of contributions based on real income

The system of social security contributions for the self-employed based on real net income —introduced by Royal Decree-Law 13/2022— is in its third year of application (2025). The contribution to the Special Scheme for Self-Employed Workers (RETA) is no longer freely set within a general contribution base, but is determined by reference to projected net income, organised into fifteen brackets ranging from income below €670 per month to income above €6,000.

From the Personal Income Tax perspective, the impact is twofold: the contributions actually paid to RETA are a deductible expense against income from economic activities, and the year-end adjustment of contributions —if real income differs from projections, refunds or additional assessments arise— may alter the tax result compared with the initial projections. It is advisable to reconcile real net income with the contribution brackets before filing.

3. Pension plans: reduced limits since 2022

The reduction limits for contributions to social welfare schemes remain at the levels set by the 2022 tax reform and still in force in 2025:

• Individual pension plan: a maximum reduction of €1,500 per year.
• Employment pension plan (with the company as sponsor): the company may contribute up to €8,500 in addition, with a reduction in the employee's Personal Income Tax, provided the company does not contribute more than twice the participant's contribution.
• The overall maximum limit is €10,000 per year (participant + sponsoring company).

The considerably lower individual limit —compared with the €8,000 available before 2022— has made employment plans more relevant as a flexible remuneration tool for executives and qualified employees.

4. Capital gains and losses on the transfer of property

The 2025 income tax return requires the inclusion of gains or losses arising from the sale of property during that year. The gain is calculated as the difference between the transfer value and the updated acquisition value. There are two relevant exemptions worth checking before paying tax:

• Reinvestment in a main home (Article 38.1 of the Act): the gain is exempt if the full amount obtained is reinvested in acquiring a new main home within the two years before or after the transfer.
• Persons over 65 (Article 33.4.b of the Act): the gain on the transfer of the main home of a person over 65 is exempt with no reinvestment condition.

For property acquired before 31 December 1994, the reduction coefficients under the ninth transitional provision of the Act remain, reducing the capital gain. Applying them requires a specific calculation and an assessment of whether it is more favourable to apply them or not, depending on the actual amounts involved.

5. Investment income: rates of the savings tax base

Investment income —dividends, interest, gains from investment funds— is included in the savings tax base and taxed at the following rates in 2025:

• Up to €6,000: 19%
• From €6,000 to €50,000: 21%
• From €50,000 to €200,000: 23%
• From €200,000 to €300,000: 27%
• Above €300,000: 28%

The two top brackets (27% and 28%) were introduced in years before 2025 and consolidate higher taxation for significant investment income. Optimising the timing of disinvestment and offsetting gains against outstanding capital losses remain the most effective tax-planning tools for investors.

6. Maternity and paternity benefits

Maternity and paternity benefits paid by Social Security or by alternative mutual welfare schemes are exempt from Personal Income Tax (Article 7.h of the Act), which includes both paid birth or adoption leave and benefits received during temporary incapacity linked to pregnancy. The maternity deduction (Article 81 of the Act) may reach €1,200 per year for each child under three and may be supplemented by the additional deduction for childcare costs at authorised centres.

What to check before filing

The complexity of the return grows with each year. Before confirming the Tax Agency's draft return, it is advisable to review:

• That all let properties apply the correct reduction percentage according to the agreement and the area.
• That the self-employed have declared their income from economic activities with the actual deduction of RETA contributions.
• That all capital gains have been declared and any exemption assessed.
• That income from foreign accounts and deposits has been correctly attributed (additional reporting obligation if the balance exceeds €50,000: Form 720).

How we help at RCM Legal

We review your return before filing, apply every applicable deduction and exemption and avoid errors that can lead to assessments, surcharges or penalties. If you receive a review from the Tax Agency or need to plan your taxation for the 2026 financial year, tell us about your situation.