Payroll Tax Calculator 2026

Understanding Dutch Payroll Tax (Loonheffing)

If you work in the Netherlands, the largest deduction on your payslip each month is loonheffing -- Dutch payroll tax. This single line item actually represents a combination of two distinct tax components that your employer is required to withhold and remit to the Dutch Tax Authority (Belastingdienst) on your behalf. Understanding what loonheffing is and how it is calculated empowers you to verify your payslip, plan your finances, and make informed decisions about your compensation.

The word loonheffing literally translates to “wage levy” and it encompasses:

1. Loonbelasting (wage tax / income tax): the income tax portion that funds general government spending, infrastructure, education, and public services.
2. Premies volksverzekeringen (national insurance premiums): social insurance contributions that fund the state pension (AOW), survivors' benefits (Anw), and long-term care (Wlz).

For expats, this system can initially seem complex because it combines what many countries separate into distinct tax and social security withholdings. In the US, for example, federal income tax, Social Security, and Medicare are all listed separately on your pay stub. In the Netherlands, they are bundled together into loonheffing, which makes the payslip look simpler but requires deeper understanding of what is included.

The Two Components of Loonheffing

Component 1: Income Tax (Loonbelasting)

The income tax component of loonheffing is a prepayment of your annual income tax (inkomstenbelasting) under Box 1. The rates in 2026 are structured as follows:

A critical detail that many people miss: the national insurance premiums (27.65%) are only charged on income within the first bracket (up to €38,883). This means the maximum annual premium is approximately €10,751 (€38,883 × 27.65%). Income above that threshold is subject only to income tax at the second and third bracket rates. This structure effectively caps your social insurance contributions, which is favorable for higher earners.

Component 2: National Insurance Premiums (Premies Volksverzekeringen)

The national insurance premiums within loonheffing fund three essential social programs:

For expats, the AOW premium (17.90%) is particularly important. Every year you live and work in the Netherlands between ages 15 and your state pension age, you accrue 2% of the full AOW pension. If you work here for 10 years, you will have earned 20% of the full pension benefit. This is relevant for financial planning, especially if you are unsure how long you will stay in the Netherlands.

It is also worth noting that these are employee premiums deducted from your salary. Your employer pays additional social insurance contributions on top of your salary, including the healthcare insurance contribution (ZVW werkgeversheffing at 6.10%), employee insurance premiums (WW, WIA/WAO), and child benefit contributions (AKW). These employer costs do not appear on your payslip as deductions but increase the total cost of employing you.

How Your Employer Calculates Monthly Loonheffing

Each pay period, your employer uses official wage tax tables (loonbelastingtabellen) published by the Belastingdienst to determine the correct withholding amount. The process works as follows:

1. Determine your taxable wage: Start with your gross monthly salary, subtract any pre-tax deductions (pension contribution, commuting allowance above the tax-free threshold), and apply the 30% ruling if applicable.
2. Look up the wage tax table: Using your pay period (monthly, 4-weekly, or weekly) and table type (white table for main employer, green table for secondary employer), find the withholding amount corresponding to your taxable wage.
3. The table already includes tax credits: The white table (witte tabel) automatically includes the general tax credit and labour tax credit in the calculation, spreading them evenly across pay periods. This is why you see lower tax on your payslip than the raw bracket rates would suggest.
4. Apply the special rate for bonuses: For incidental payments like holiday allowance, 13th month, or overtime bonuses, the employer uses the special rate (bijzonder tarief) instead of the standard table.

The tax tables are updated annually by the Belastingdienst to reflect new bracket boundaries, rates, and credit amounts. Employers receive the updated tables before January 1 and implement them in their payroll software, which is why your January payslip may show different withholding than December even if your salary has not changed.

Reading Your Dutch Payslip: A Line-by-Line Guide

Your monthly payslip (loonstrook) contains detailed information about how your loonheffing is calculated. Here is a typical payslip breakdown for an employee earning €55,000 per year:

The “reservering vakantiegeld” line shows the monthly accrual of your holiday allowance. This is not deducted from your pay; it is simply an indication of how much holiday pay is being set aside for the annual payout in May.

Some payslips also show the employer's costs separately, including the employer's healthcare contribution (ZVW werkgeversheffing), unemployment insurance premiums (AWF/UFO), and disability insurance (WIA). These are paid by your employer and do not reduce your take-home pay.

The Role of Tax Credits in Reducing Loonheffing

Two tax credits are automatically applied through the payroll system to reduce your monthly loonheffing:

General Tax Credit (Algemene Heffingskorting)

This credit is available to all taxpayers. In 2026, the maximum is €3,115, distributed as approximately €260 per month. It phases out at 6.398% for income above €29,736, reaching zero at approximately €78,427. Through your monthly payroll, this credit is applied in equal installments, meaning your employer reduces the monthly loonheffing by the applicable credit amount.

Labour Tax Credit (Arbeidskorting)

Exclusively for employees and self-employed with active income, the maximum is €5,685 in 2026, applied as approximately €474 per month at the maximum. It builds up from zero at low incomes, peaks at €45,592, and then phases out at 6.51% per euro above that. At approximately €132,920, the credit is zero.

Combined, these credits reduce your monthly loonheffing by up to approximately €733 per month (€8,800 per year). Without these credits, the monthly tax on a €55,000 salary would be approximately €1,831 instead of €1,098 -- a difference of €733. This is why the effective tax rate in the Netherlands is significantly lower than the headline bracket rates.

Loonheffing and Your Annual Tax Return

The loonheffing withheld by your employer throughout the year is a provisional payment toward your final income tax liability. When you file your annual tax return (belastingaangifte), the Belastingdienst calculates your actual tax based on all income sources and applicable deductions, then compares it to the total loonheffing already paid.

Common reasons why the final assessment may differ from total loonheffing:

• Mortgage interest deduction: If you own a home with a mortgage, the interest is deductible from your Box 1 income. Since this deduction is not included in payroll calculations, you typically receive a refund when filing your return.
• Multiple employers: If you applied the loonheffingskorting (tax credit) at more than one employer, too little tax was withheld, and you will owe additional tax.
• Other income: Income from freelance work, rental properties, or foreign sources needs to be reported and may not have had tax withheld.
• Salary changes during the year: If your salary changed significantly mid-year, the monthly tables may have over- or under-withheld based on the new salary level.
• Specific deductions: Charitable donations, medical expenses above the threshold, study costs, and alimony payments can reduce your taxable income below what was assumed in payroll.

For many employed expats with a single employer and no additional deductions, the annual tax return is straightforward and the difference between loonheffing paid and actual tax owed is small. However, if you have a mortgage, the annual return often results in a significant refund -- typically €1,000 to €5,000 depending on the mortgage amount and interest rate.

Payroll Tax for Expats: Special Considerations

International workers face several unique payroll tax situations:

• 30% ruling: If you have the 30% ruling, your employer calculates loonheffing on only 70% of your gross salary (in years 1-2). This dramatically reduces the monthly withholding and is the primary mechanism through which the ruling increases your net pay.
• First payslip timing: When you start working in the Netherlands, your employer needs your BSN (citizen service number) to process payroll correctly. If your BSN is not yet available, the employer must withhold tax at the anonymous rate (anoniementarief) of 52%, which is much higher. This is corrected once your BSN is registered.
• A1 certificate holders: If you are posted to the Netherlands temporarily by a foreign employer and hold an A1/CoC (Certificate of Coverage), you may be exempt from Dutch national insurance premiums. Your loonheffing would then consist only of income tax, significantly reducing the first-bracket rate from 35.75% to 8.10%.
• Non-resident taxpayer status: If you are classified as a non-resident taxpayer (buitenlandse belastingplichtige), you may not be entitled to the full general tax credit and labour tax credit. Qualifying non-residents from the EU/EEA/Switzerland who earn 90% or more of their income in the Netherlands can opt for resident taxpayer treatment.

Monthly Loonheffing at Common Salary Levels

The following table shows the approximate monthly loonheffing at various gross salary levels in 2026, assuming standard employment with one employer and full tax credits:

These figures exclude pension deductions and holiday allowance. Actual amounts depend on individual circumstances. Use the calculator above for a precise result.

Employer Obligations and Costs Beyond Loonheffing

While loonheffing is the employee-side payroll tax, employers bear additional costs that are important context for understanding total employment costs in the Netherlands:

In total, the employer's additional costs typically range from 25% to 40% on top of the gross salary. This means an employee with a €60,000 gross salary costs the employer approximately €75,000 to €84,000 per year. This is relevant when negotiating: if an employer tells you the “total cost to company” is €80,000, your gross salary might be around €60,000 after accounting for employer costs.

Frequently Asked Questions

Sources and Further Reading

This calculator uses official rates and tables from:

• Belastingdienst: Loonheffingen (payroll taxes)
• Belastingdienst: Wage tax tables
• Government.nl: Income tax information

Payroll tax calculations can be affected by individual circumstances such as pension schemes, the 30% ruling, and multiple employment relationships. For complex situations, consult a payroll specialist or tax advisor.