Tax changes from January 2023

At the turn of the year, a number of tax changes will come into force that will have an impact on payroll accounting. We would like to inform you briefly about these.

1. increase of the basic tax allowance and the child allowance

As of 01.01.2023, the basic tax allowance will increase from € 10,347 to € 10,908 (annually). The child tax allowance will increase for each parent from € 2,730 to € 3,012 (i.e. a total of € 6,024, including the childcare allowance of € 2,928, then a total of € 8,952 per year). The LBV will automatically take the increase in the allowances into account as of the salary notification for January 2023.

2. abolition of the limit on the lump-sum pension allowance for contributions to the statutory pension insurance scheme

The lump-sum pension allowance is used in the wage tax deduction procedure to take into account the employees‘ pension expenses in a lump-sum form. As of 01.01.2023 – and thus one year earlier than originally planned – the previous percentage limitation of the pension lump sum for pension insurance contributions will be abolished. The LBV will also implement this change as of the remuneration notification for January 2023.

3. increase in the exemption limit for the levy of the solidarity surcharge

The exemption limit for the solidarity surcharge will be increased from the current €16,956 to €17,543 (annually in tax classes I, II and IV to VI) or from €33,912 to €35,086 (annually in tax class III) as of 01.01.2023. This increase in the exemption limit will also be automatically taken into account as of the remuneration notification for January 2023.

4 Further changes planned

In addition, the Annual Tax Act 2022 plans to increase the employee lump sum from € 1,200 to € 1,230 and the relief amount for single parents from € 4,008 to € 4,260 as of 01.01.2023. The Annual Tax Act 2022 is currently still in the ongoing legislative process. Once the law has been promulgated, the LBV intends to automatically take the increases into account in the next remuneration notification with retroactive effect from 01.01.2023.