The Grand Duchy has returned to growth this year. And the economy is expected to continue growing next year. Enough to leave some room for the government to be more generous.
2024 should end with a annual increase in the cost of living of +2.1% “only” in Luxembourg. That is, a little less than what analysts had anticipated. Stat . And if see this inflation in (strong) slowdown is rather good news for everyone’s wallet, the decline in price increases has also resulted in index carryover. Long awaited for this last quarter, the +2.5% increase in all pay, salaries and pensions will have to wait the very beginning of 2025…
So here is the coming year starting with this generalized increase. But on the income side, this is not the only “good news”. Particularly for employees receiving unskilled minimum social wage. On January 1, its amount will be revalued: +2,6%. Therefore a final amount close to €15.24 per hour or 2,635 €/month.
Furthermore, the Frieden Government announced the abolition of income tax for those who receive this unqualified SSM.
No other index in 2025
In view of current “prognoses”, 2025 will only have one index. Indeed, over the whole year, the increase in inflation announced would only be +2.5%, estimates the Stat. Enough to push back generalized indexing for, here again, rather the very beginning of 2026.
However, before that, old age pension beneficiaries will see their payment increase with the transition to the new year. The rate of increase has not yet been announced. They had increased by +1.1% as of 1 2024; it should be of the same order this time again.
The fact remains that economically after a year of recession in 2024, the Grand Duchy has found the path to growth. Modestly but still orderly + 1% over twelve months. Result, even if business confidence is far from being good, employment continued to grow This year. Shyly but the bar 520,000 active men and women in Luxembourg was achieved for the first time (and this mainly for the benefit of the recruitment of cross-border workers).
For 2025, Statec plans “ a slight recovery in employmentbut a job market that is generally struggling to recover ».
The crisis which particularly affects the construction sector (3,000 jobs lost since 2022) is still weighing on the volume of labor employed in the country. Currently at 5.8%, the rate of unemployment expected to rise further in the coming months. To settle at 6% at the end of 2025, experts estimate.
Taxes rhyme with gifts
As of January 1, all employees and retireesresidents or cross-border workers, will gain purchasing power. Around 6%, thank you.
In fact, the income tax scales will be increased by 2.5 brackets. Which should allow all taxpayers to “win” almost 300 million euros additional.
Furthermore, Minister Gilles Roth promised tonoticeably lighten the sums requested by the Luxembourg tax authorities from the “famous” Class 1including singles, veuf-ve-s or single-parent families. For “single adults” with dependent child(ren) whose gross annual salary does not exceed 52,400 euros per year and benefiting from 100% of the CIM tax credit, total exemption from income tax is also acquired for 2025.
Already, 2026 is announced as the year of the “Great Tax Reform”. The passage towards the individualization of tax (and not by category) remaining the objective.
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