What changes for wage tax and social security contributions in 2026

Basic tax-free allowance and tax rates

Minimum wage increase 2026

The minimum wage is the lowest hourly wage guaranteed by law that employees may receive. It protects against wage dumping and makes sure basic needs can be covered.

Effects of the increase

With the minimum wage increase in 2026, the earnings limit for mini-jobs rises as well, so mini-jobbers can keep working under the new conditions without losing their exemption from social security contributions.

You will find the exact new minimum wage figures in our current overview.

What is the basic tax-free allowance?

The basic tax-free allowance is the part of income that stays tax-free in order to secure a subsistence minimum. People on low incomes therefore pay less tax or none at all. Income below the basic tax-free allowance is not taxed, which benefits low-earning households in particular.

Why is the basic tax-free allowance adjusted?

The basic tax-free allowance is set each year in the German Income Tax Act (Einkommensteuergesetz, EStG) and raised regularly. This adjustment takes inflation and rising living costs into account to make sure the tax-free subsistence minimum stays realistic.

Additional meal expenses 2026

Additional meal expenses are tax-deductible costs for meals incurred during a work-related absence from the place of work. They let employees claim the extra spending caused by business trips against tax.

How are additional meal expenses calculated?

The amount depends on the flat rates set by law, which vary with the length of the absence and the destination. For 2026 the flat rates have been adjusted again to account for rising living costs and price differences between locations.

Read more about additional meal expenses and the per diem allowance here.

Tax-free allowance for company events 2026

The tax-free allowance for company events lets businesses give their employees tax-free benefits in the form of events such as company parties or outings. Within this allowance, the costs of such events are not taken into account for tax purposes.

Amount of the allowance

The allowance for 2026 has again been set at €110 per employee per year. Up to this amount the benefits stay tax-free, which gives employers and employees a financial advantage.

What are benefit-in-kind values?

Benefit-in-kind values are non-cash benefits or benefits in kind that an employer can grant to employees. They include, for example, private use of a company car, discounted housing, subsidies or meal vouchers.

Why are benefits in kind taxed?

Because these benefits are part of income, they are recorded for tax purposes and have to be taxed. The benefit-in-kind value serves as the basis for calculating the non-cash benefit and accounting for it under tax law.

The current benefit-in-kind values for 2026 are adjusted annually and follow the rules set by the tax authorities.

Increase of the maximum amount for electric vehicles 2026

The maximum amount for all-electric vehicles sets the purchase price up to which buyers can claim tax advantages. The aim is to encourage the switch to environmentally friendly mobility and make electric mobility more attractive.

Why is the maximum amount adjusted?

The adjustment takes market conditions, technological developments and policy goals into account. Raising the maximum amount is meant to encourage innovation and competition and to make modern electric vehicles easier to access.

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Increase of the contribution assessment ceiling 2026

What is the contribution assessment ceiling? 

The contribution assessment ceiling sets the income up to which social security contributions are calculated. It applies to benefits such as pension, unemployment and health insurance. Income above this ceiling is free of contributions, so fewer social security contributions are due on higher earnings.

The contribution assessment ceiling is recalculated every year. The basis is the average gross income of insured people, adjusted for inflation and economic development. The aim is to ensure a fair distribution of contributions and stable funding for the social security system.

What is the contribution assessment ceiling in 2026?

The contribution assessment ceiling is set separately for health and long-term care insurance and for pension and unemployment insurance.

The annual earnings threshold 2026

The annual earnings threshold sets the annual gross income up to which employees remain subject to compulsory insurance in the statutory health insurance scheme. If income exceeds this figure, compulsory insurance no longer applies and a switch to private health insurance becomes possible.

Like the contribution assessment ceiling, the annual earnings threshold is adjusted every year. The basis is the average gross income of insured people. A special rule applies to employees who already had private health insurance before 31 December 2025. For them a lower “special annual earnings threshold” applies.

Digitalise processes for a better overview

Tax matters are a headache even without all these changes. Staying up to date and staying within the law already costs enough working hours.

That is why clockin takes a good deal of work off your hands. With the clockin app your employees record their working hours digitally. The collected data does not have to be transferred into the payroll system by hand at the end of the month. You can integrate clockin seamlessly with other programs without any trouble.

Integrations with lexoffice, Paychex and DATEV make payroll accounting, accounting and administrative processes, and payroll and HR administration processes easier.

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