The new year is just around the corner. So it’s worth taking a look at the most important changes that will take effect for consumers. What will change in the new year?
Income tax: increased basic tax allowance
The basic tax allowance (Grundfreibetrag) will increase, for a total tax allowance of 12,348 euros as of 1 January 2026. A single person who earns up to this amount in a year does not have to pay any income tax, anyone who earns more only has to pay taxes for the amount they earn above and beyond the basic tax allowance. Starting in 2026, the solidarity surcharge (Solidaritätszuschlag) will only be levied for those with a total income tax payment of 20,350 euros or more, in 2025 it was levied for those owing income tax of 19,950 euros or more.
Reduced VAT for restaurants and delivery services
Starting on 1 January 2026, meals in restaurants and other catering services will only have to charge the reduced VAT (Umsatzsteuer) rate of 7 percent. However, the regular VAT rate of 19% will continue to apply to drinks
Tax-free active retirement
The German government is planning to introduce an active retirement (Aktivrente) scheme. It has not yet been passed into law and is currently under consultation in the German parliament. The scheme was originally supposed to take effect on 1 January 2026. Active retirement would allow those who have reached the legal age of retirement to voluntarily continue working and earn up to 2,000 euros a month tax free. This rule applies to employees who are required to pay into social security, whether or not they are already receiving pension benefits.
Increase in child benefit, child tax allowance and immediate additional child benefit
The child benefit (Kindergeld) will be raised to 259 euros a month per child as of 1 January 2026. That is 48 euros extra a year for every child.
The child tax allowance (Kinderfreibetrag) will also increase, from 6,672 euros to 6,828 euros in 2026 (3,414 euros per parent). In addition to this, there is the allowance, which has not changed, for care, education or training. This allowance comes to 2,928 euros (1,464 euros per parent), so that married partners who file jointly are given a total tax allowance of 9,756 euros per child and year.
For children growing up in households that receive unemployment benefits (Bürgergeld) and other services, the immediate additional child benefit (Kinderfsofortzuschlag) will increase by 5 euros, so that affected families will now receive 25 euros a month.
Contact
Kathleen Altmann
Press spokeswoman
