Adjusting your tax withholding rate: a step-by-step guide

Net tax, net paid and taxable net

Implemented in France since January 1, 2019, the tax withholding involves deducting the income tax (IR) directly from the salary before it is paid. The payslip displays a personalized rate, determined based on the last tax declaration of the tax household. For greater confidentiality, employees can also choose to apply a « neutral rate », so that the employer cannot estimate their overall income. This is determined based on the salary (see our box at the end of the article).

The pay slip includes a line every month named « Net to pay before income tax ». It corresponds to the net salary before tax withholding. Another line named « Net paid » refers to the amount actually paid, after the application of tax withholding. For people who have stayed with the same company all year, the « taxable net » amount listed on the December pay slip will be used to calculate the income tax for the following year. This amount takes into account the non-deductible CSG and CRDS. For those who have changed jobs during the year, you will need to add up the fiscal nets from the other paychecks.

Annonce

Estimate the current year's income before adjusting the withholding tax rate

To know whether your income tax is going to decrease or increase, it needs to be estimated. Equipped with your salary earnings from the past year, any potential other incomes need to be added: rental investments, financial revenues... Similarly, tax reductions and credits for which the taxpayer is eligible should be evaluated.

To help you, tax services have developed a simulator that can be found at https://simulateur-ir-ifi.impots.gouv.fr/calcul_impot/2024/. This simulator will estimate the amount of tax to be paid in 2024 on 2023 incomes. The tax rate and the rate of withholding applicable from September 1, 2024 will result from this. They will be displayed at the bottom of the result page.

In some cases, your situation may have changed. It could be a new family situation (Civil partnership, marriage, separation, arrival of a child...) that increases or decreases the number of tax shares, or a change in income. Consequently, if your tax is going to decrease, you can request to reduce the withholding rate to avoid overpaying. Similarly, if it will increase, you can anticipate the rate hike to avoid a brutal catch-up in 2025.

Changing one's source withholding rate

In tax matters, it is better to anticipate things. If adjustments are needed, you can request to change your rate before the automatic adjustment in September.

Let's remember that income tax is progressive. It is calculated in brackets, each of which is taxed between 0 and 45%. In 2022, inflation was 5.2% according to INSEE. The state has therefore decided to revalue the amount of the brackets by 5.4% to avoid an additional loss of purchasing power.

2024 Tax Scale on 2023 Revenues

Bracket Rate Approx. Calculation Formula
Less than € 11 294 | 0% | 0 €
From €11 295 to €28 797 | 11% | (Income x 0.11) - (1,185.47 x number of tax shares)
From €28 798 to €82 341 | 30% | (Income x 0.30) - (6,406.29 x number of tax shares)
From €82 342 to €177 106 | 41% | (Income x 0.41) - (15,048.99 x number of tax shares)
Above €177 106 | 45% | (Income x 0.45) - (21,808.75 x number of tax shares)

The amount of tax deducted from the salary depends on the rate calculated by the tax administration or adjusted by the taxpayer. Apart from voluntary changes and the automatic annual update following the income declaration, the rate remains stable and the amount deducted varies according to the salary received.

If you think your income will decrease in 2024, you can at any time request a decrease in the withholding rate in order to regain purchasing power and not overpay. Conversely, immediately increasing the rate on increased income will avoid paying a significant sum at the time of the catch-up the following year.

For this, go to impots.gouv.fr website, in your personal space. On the right of the screen, your current rate is displayed. To modify it, click on « Manage my source withholding rate ».

A new window opens. You can indicate any change in family situation that changes the number of dependents and therefore the number of tax shares: marriage, civil union, divorce, birth of children… Then click on « Report a change ».

If it's the evolution of your income that prompts you to change the withholding rate, click on « Update following an increase or decrease in your income ».

You will have to answer a series of questions about a possible special situation (pension, veteran's card ...) as well as about people dependent or attached to the tax household. You will then indicate the amount of income received in 2023, the deductible expenses paid, as well as the anticipated revenues and expenses until the end of the year.

You can then choose to apply the new anticipated rate. The tax services will transfer the information to the employer. The inclusion of the change on the payslip may take between 1 and 3 months.

Beware of mistakes that may lead to penalties

Be careful when you submit your adjustment request, because declaration mistakes can be expensive! If the gap between the estimated income and the actually received income has caused a more than 10% decrease in the withholding tax, the administration may impose a penalty of 10% of the amount. The penalty can be heavier if the total amount withheld was less than 30% of what it would have been without the erroneous declaration.

Neutral rate scale 2024