Personal Income Tax Reform: What Will Change for SME Entrepreneurs and the Self-Employed?
August 2026 - The federal personal income tax reform will bring about a series of tax changes starting with the 2026 tax year. The goal is clear: to make working and running a business more attractive by reducing the tax burden and increasing take-home pay.
For the self-employed and SME entrepreneurs, the reform includes many positive measures, although there are also important considerations for those who operate through a corporation. Here is an overview of the most significant changes.
More Financial Breathing Room for the Self-Employed
For the self-employed operating as sole proprietors, the reform looks largely positive. The government aims to stimulate entrepreneurship by reducing administrative burdens and making a larger portion of income tax-free. This should ensure that working and running a business once again pays off more.
One of the most notable changes is the elimination of mandatory advance tax payments for self-employed individuals operating as sole proprietors and assisting spouses. Until now, they could face a tax surcharge if they did not pay enough in advance during the year. Starting with the 2026 tax year, that penalty will be completely eliminated. Those who choose to make advance payments voluntarily will receive a tax credit for doing so. This gives entrepreneurs more freedom to manage their own cash flow. For company executives, nothing will change: they will still be required to make advance payments.
Higher Tax-Exempt Threshold Means More Take-Home Pay
A second important measure is the gradual increase in the tax-exempt threshold. Currently, every taxpayer is not taxed until their income reaches a certain level. That tax-exempt portion will rise over the coming years from 10,910 euros to 15,600 euros by the 2030 tax year.
The result is simple: a larger portion of earned income remains tax-free, leaving self-employed individuals and employees with more take-home pay. The increase will be implemented in stages, so that the benefit grows year after year.
New Entrepreneur Deduction Starting in 2027
Starting in the 2027 tax year, self-employed individuals will also receive an additional tax benefit through the new entrepreneur deduction. They may exclude 10% of their profits and income from taxable income, up to a maximum of 650 euros. By 2029, that cap will rise to 900 euros.
While this amount is not revolutionary in itself, the measure does offer several advantages. The deduction is applied automatically, requires no additional paperwork, and is in addition to existing tax incentives for self-employed individuals. Combined with the higher tax-free allowance, this represents another modest but structural improvement in net income.
Families and IT Entrepreneurs Also Benefit
The reform is not limited to entrepreneurs alone. Several tax benefits for families are also being adjusted.
For example, the supplement to the tax-free allowance for families with one or two dependent children is increasing. By 2029, the tax benefit for the first and second child will be fully equalized. With this, the government aims to better align the system with current family realities.
In addition, the favorable tax regime for copyrights will once again be made available to software developers. Programmers had been unable to take advantage of this since 2024, but this option will return starting with the 2026 tax year. Of course, specific conditions will continue to apply, so professional advice remains advisable.
Companies Face Stricter Rules
For entrepreneurs who operate through a corporation, the outlook is less rosy. Various measures make it necessary to take another critical look at the existing compensation strategy.
For small corporations to retain the reduced corporate income tax rate, the required minimum compensation for the CEO is increasing to 50,000 euros. Furthermore, that amount will be indexed annually.
In addition, benefits in kind—such as a company car, free housing, or other fringe benefits—may now account for no more than 20% of the total compensation package. If a company exceeds that limit, it loses its right to the reduced tax rate.
Dividends are also becoming less attractive. As of July 1, 2026, the withholding tax on VVPRbis dividends will increase from 15% to 18%. New liquidation reserves will also be taxed more heavily. As a result, the difference between compensation paid as salary and that paid as dividends will be smaller than before.
For many business leaders, it therefore makes sense to work with their accountant to reassess the optimal mix of salary, dividends, and fringe benefits.
Interesting Measures for Employers
The reform also includes several changes that may be of interest to employers.
For example, the tax-advantaged regime for overtime is being permanently expanded to 180 tax-advantaged overtime hours per employee per year. In addition, employees can now work up to 240 net hours of voluntary overtime without withholding tax or income tax, provided that no overtime pay is paid for these hours. In sectors where the workload fluctuates significantly or where peak periods occur regularly, this offers additional flexibility.
A Few More Changes to Keep in Mind
In addition to the major reforms, the law includes a few less noticeable—but no less relevant—changes. For example, the marriage quotient is being phased out gradually, the rules for single parents are changing, and starting in 2028, the special social security contribution will be calculated individually rather than per household. In addition, a new capital gains tax on certain financial assets has been in effect since early 2026.
Depending on your personal or family situation, these measures may also impact your overall tax planning.
Important note: On July 9, 2026, the Chamber of Representatives approved this law reforming personal income tax. This law has yet to be published in the Belgian Official Gazette.
