If you earn anywhere between €20,000 and €60,000 a year, reach for the bubbly: your next paycheque will include a three per cent income tax rebate owed since the beginning of the year.

Employers will shortly be receiving a circular with payroll update instructions

Last Monday’s Budget vote means income between those two rough parameters – the precise numbers vary depending on your family status – is now taxed at 32 per cent, rather than the previous 35 per cent rate.

The new lower rate is backdated to January 1, meaning eligible workers are now owed a four-month tax rebate, albeit a fairly modest one, by the tax man.

Whether employees see the money by the time their next payslip comes around depends on how quickly their bosses update payroll systems with the new taxation tables.

A Finance Ministry spokesman told The Times that employers would shortly be receiving a circular with payroll update instructions from the Department of Inland Revenue.

Once payrolls are updated, the Final Settlement System mechanism would automatically look at how much income tax a person had already paid this year, calculate how much they should have paid, and refund the difference, a ministry spokesman said.

“Any tax overcharged in the previous pay periods will be corrected... the inbuilt self-correcting mechanism within the FSS will ensure that the correct amount of tax is paid by the end of the year,” they explained.

The changes mean that a person earning €3,000 monthly before tax will likely find that their monthly €660 income tax deduction suddenly dip to €496 next month, to make up for having overpaid tax since January.

That figure would then level at €619 for subsequent months, meaning savings of €41 a month.

Mid- to high-income earners can expect further savings in the years to come, with the Government having said it will honour the previous administration’s pledge to further reduce rates for this tax band to 29 per cent in 2014 and 25 per cent in 2015.

The decision to lower income tax rates for robust earners while keeping tax bands unchanged had been criticised as socially regressive by the Labour Party when it was first announced by the previous Government last November.

Speaking at the time as Opposition Leader, Prime Minister Joseph Muscat had promised to “keep those who did not receive a tax cut in mind”, while the PL electoral manifesto pledges to gradually adjust tax bands to ensure a larger proportion of the population benefits from reduced taxes.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.