Personal tax credit, tax brackets and changes in employment
If there are any changes in where you receive wages or pension payments from, it is important to ensure the correct use of the personal tax credit and tax brackets.
This applies, for example, if you:
change jobs or take on an additional job
start receiving a pension or your pension payments change
Further information on personal tax credit and tax brackets for the elderly and pensioners.
You are responsibile for providing your employers the correct information on how to use your personal tax credit and whether other payments to you may affect the correct tax bracket.
Information your employer needs
When you change jobs, or when other changes in employment occur, it is your responsibility to inform your employer about the following:
whether you intend to use the personal tax credit, and from which date
whether you have any unused (accumulated) personal tax credit
which tax bracket should be applied
Many employers request confirmation of the status of the personal tax credit from Skatturinn’s online service. This confirmation can be saved and sent to your employer.
1: Using the personal tax credit correctly
When you change jobs or go on parental leave, it often happens that more than one employer deducts your personal tax credit from tax payments. This may occur, for example, if a former employer still needs to pay out accrued vacation pay or other payments.
It is therefore important that you inform your former employer of when you want the use of your personal tax credit to be transferred elsewhere.
If payments from one employer are usually higher than 230.000 ISK per month, it is best to use the full personal tax credit with that employer. Otherwise, the personal tax credit can be divided between payers, and you must inform each of them how much they may use.
The tax calculator can help you decide how best to use your personal tax credit. Your employer may also be able to provide guidance.
2: Accumulated personal tax credit
If you have accumulated personal tax credit, for example after working part-time or studying, you can inform your employer that you wish to use this credit to reduce your tax payments.
You can view your status on Skatturinn's service portal and compare it with the maximum usage by month.
More information on accumulated personal tax credit.
3: Correct tax brackets
If you receive income from more than one employer, it is important that all employers calculate tax using the correct tax bracket.
If your monthly wages exceed 498.122 ISK with one employer, other employers must withhold tax on your wages at the next tax bracket. If your monthly wages exceed 1.398.450 ISK the portion that exceeds that limit is calculated in the third tax bracket.
More information on personal tax credit and tax brackets.
Service provider
Skatturinn - Iceland Revenue and Customs