Immediate impact on French income
This drop will affect both employees and retirees, affecting nearly 47 million people. This reduction is not due to an error by pension funds or employers, but to a very specific tax mechanism.
The withholding tax, introduced in 2019, is at the heart of this situation. This tax system directly deducts a percentage of income tax from salaries and pensions. The rates, recalculated annually, can significantly influence the net amounts received by taxpayers.
Understanding withholding tax
Withholding tax consists of deducting income tax directly from regular income such as salaries or pensions. The rate applied is recalculated each year based on declared income. Therefore, any increase in income could lead to an increase in the tax rate.
If your 2023 income has increased compared to 2022, expect a higher withholding rate from September 2024.
Possible adjustments for taxpayers
The French have the possibility of managing their withholding tax rate via the tax website. This option allows the rate to be adjusted based on income fluctuations, thereby reducing the impact of an unexpected increase. However, this modification is only temporary and must be renewed each year to maintain an appropriate rate.
+120 € per month for farmers' retirement from 2025: who is affected?
To read
End of year tax notifications: what taxpayers should anticipate
This proactive approach can prevent unpleasant surprises on pay slips or pension statements. Ignoring this possibility could lead to financial disappointments, particularly when the rate is automatically readjusted by the tax administration at the start of the following year.
What should you do if you are affected by this drop?
The first step is to check your last tax notice and compare the levy rates applied. A visit to your personal space on the tax website provides access to the “Manage my withholding tax” option where you can request an update of your rate.
It is crucial to make these adjustments before the end of the year to avoid an unexpected drop in income. Taxpayers who neglect this step will only see their new rate applied after February 2025, meaning the first two months of the year could be more financially strained.
- Check your current withdrawal rate.
- Compare it with rates from previous years.
- Access your personal space on impots.gouv.fr.
- Adjust your rate if necessary.
- Confirm changes before the end of the year.
By taking these steps, employees and retirees can better manage their finances and avoid surprise reductions in their income. Understanding and anticipating tax changes is essential to maintaining financial stability in the face of complex withholding tax mechanisms.
To read
Understanding the impact of the recent increase in Agirc-Arrco pensions for November 2024
