The second tax threshold is a key element of the Polish tax system, directly affecting the amount of income tax paid by entrepreneurs and individuals settling under the general rules (zasady ogólne). Understanding how tax thresholds work is essential for proper financial planning and for settling your tax liabilities correctly.
In 2026 the system of tax thresholds remains unchanged compared with the previous year, which gives taxpayers stability and predictability. The first tax threshold covers income up to PLN 120,000 a year and is taxed at 12 percent, while the second tax threshold covers income above this limit and is taxed at 32 percent.
The second tax threshold rate in 2026 is 32 percent and applies to income above PLN 120,000 a year. Under the threshold system, only the excess of income over the limit is taxed at the higher rate, not the taxpayer's entire income
Taxpayers often misunderstand the threshold mechanism and wrongly believe that exceeding the threshold means the whole income is taxed at the higher rate. In reality the system is progressive — only the part of income above the threshold is taxed at the higher rate, while the rest is still taxed at the lower first-threshold rate.
Knowing how the second tax threshold works is particularly important for entrepreneurs running a business, higher-earning employees and people planning additional sources of income. A proper understanding of these mechanisms makes it possible to reduce the tax burden within the law.
The second tax threshold in 2026
The year 2026 brought no changes to income tax rates or tax thresholds in Poland. The legislator decided to keep the existing structure, continuing the solutions introduced by earlier tax reforms.
In 2026 the current system of tax thresholds is as follows: the first tax threshold covers income up to PLN 120,000 a year and is taxed at 12 percent, while the second tax threshold covers all income above this limit and is taxed at 32 percent.
The second tax threshold limit is PLN 120,000 a year and has remained unchanged since 2022. This means that taxpayers with income above this amount must apply the higher tax rate to the excess income
The stability of tax thresholds in 2026 gives taxpayers predictability and the possibility of long-term financial planning. With no changes in this area, entrepreneurs and individuals can continue the tax strategies they have developed without having to adapt to new rules.
The two-threshold system was introduced to ensure progressive taxation, meaning that people with higher incomes pay proportionally more tax. It is intended to spread the tax burden fairly across society and to secure adequate revenue for the state budget.
The second tax threshold applies only to people settling under the general rules according to the tax scale (12% and 32%). Taxpayers using the flat 19% tax (podatek liniowy), the flat-rate tax on recorded revenue (ryczałt) or other forms of taxation are not covered by the threshold system and settle under separate rules.
Who the second tax threshold applies to
The second tax threshold applies to a specific group of taxpayers who meet criteria relating both to the form of taxation and to the level of income. The basic condition is settling under the general rules according to the Polish tax scale.
The main groups of taxpayers affected by the second tax threshold are:
- Employees under an employment contract with income above PLN 120,000 a year
- Entrepreneurs running a business and settling under the general rules
- People in liberal professions (doctors, lawyers, architects, consultants)
- Workers paid under contracts of mandate (umowa zlecenia) or contracts for specific work (umowa o dzieło)
- Entrepreneurs letting property as part of a business taxed under the tax scale (private rental has been taxed only under ryczałt since 2023)
- Pensioners combining benefits with additional income from work
The second tax threshold applies only to taxpayers settling under the general rules according to the tax scale. Entrepreneurs using the flat tax, ryczałt or the tax card (karta podatkowa) are not covered by the threshold system
Salaries under an employment contract are always taxed under the tax scale — the flat tax can only be chosen for business income, not for a salary. Once income of PLN 120,000 earned from a given employer since the beginning of the year is exceeded, the employer must calculate the income tax advances at 32 percent on the excess income (Article 32(2) of the PIT (personal income tax) Act).
Entrepreneurs running a business can choose between different forms of taxation, but those who choose the tax scale are also subject to the threshold system. This means they have to monitor their income and calculate tax accordingly after the threshold is exceeded.
People with income from various sources, such as salaries, fees under contracts of mandate and contracts for specific work, or income from a business taxed under the tax scale, may also be covered by the second tax threshold if their total income exceeds the limit. In such cases, income taxed under the tax scale is added together in the annual tax settlement; capital gains (19%) and revenue from private rental (ryczałt) are settled separately.
Rules for settling the second tax threshold
Settling the second tax threshold follows strictly defined rules that ensure taxation is progressive. It is crucial to understand how tax is charged once the limit of PLN 120,000 a year is exceeded.
Tax after exceeding the threshold is settled as follows:
- Calculate the tax on income up to PLN 120,000 at 12 percent
- Deduct the tax-reducing amount of PLN 3,600
- Calculate the excess of income over PLN 120,000
- Apply the 32 percent rate to the excess income
- Add up the tax from both thresholds
After exceeding the first tax threshold, the taxpayer does not lose the lower rate for income falling within the first threshold. This means that income up to PLN 120,000 is still taxed at 12 percent, and only the excess over this amount is taxed at the higher rate of 32 percent.
Exceeding the tax threshold does not mean that the entire income is taxed at the higher rate. The progressive system ensures that the 32 percent rate applies only to the excess of income over PLN 120,000 a year
Practical example: taxpayer Jan Kowalski earned income of PLN 150,000 in 2026. The first threshold (PLN 120,000) is taxed at 12%, giving PLN 14,400 of tax minus the PLN 3,600 tax-reducing amount = PLN 10,800. The excess of PLN 30,000 is taxed at 32%, giving PLN 9,600 of tax. The total tax is PLN 20,400.
The first part of the income is PLN 120,000 multiplied by 12 percent, which gives PLN 14,400 of tax. The tax-reducing amount of PLN 3,600 is deducted from this, which finally gives PLN 10,800 of tax on the first threshold.
The excess income of PLN 30,000 is taxed at 32 percent, which means additional tax of PLN 9,600. The total tax payable is PLN 20,400.
The tax-reducing amount of PLN 3,600 is available to all taxpayers settling under the general rules, regardless of their income. It is deducted from the tax calculated on the first tax threshold
Joint settlement with a spouse and the second tax threshold
Joint settlement with a spouse is an important way of reducing the tax burden, especially when one spouse exceeds the second tax threshold. In certain circumstances this mechanism can significantly reduce the total tax paid by the family.
The basic rule of joint settlement is to add up both spouses' income, divide the total by two and apply the tax scale to the resulting amount. The result is then multiplied by two, giving the final amount of tax payable by the spouses.
Joint settlement with a spouse can effectively reduce tax when one spouse has income above the second tax threshold and the other has low or no income. This mechanism can lead to significant tax savings
The benefits of joint settlement are most visible where there are large differences in income between the spouses. If one spouse earns well above PLN 120,000 a year and the other has low or no income, joint settlement may result in more of the income being taxed at the lower rate of 12 percent.
Joint settlement example: spouse A earns PLN 180,000, spouse B PLN 20,000. The combined income of PLN 200,000 divided by 2 = PLN 100,000 per person. Each pays tax only at 12%: in total 2 × (PLN 12,000 - PLN 3,600) = PLN 16,800. If settling individually, spouse A would pay PLN 30,000 (PLN 10,800 + 32% × PLN 60,000) and spouse B PLN 0 — the saving is PLN 13,200.
A taxpayer who exceeded the second tax threshold during the year but chose joint settlement with a low-earning spouse may still benefit from taxation at 12 percent. However, this mainly concerns the annual settlement, because during the year income tax advances are calculated under the general rules.
The key limits of joint settlement follow from Article 6(2) and (8) of the PIT Act. The spouses must be married and have joint marital property for the whole tax year (or from the wedding day to the end of the year), and the application for joint taxation is made in the annual tax return. Joint settlement is not available to spouses where at least one of them uses the flat tax or ryczałt (the exception is ryczałt on private rental). Business owners' annual returns, including those filed jointly with a spouse, are prepared by our accounting firm in Warsaw.
Joint settlement with a spouse is a choice made in the annual tax return, not during the year. An employer can take it into account in the advances only if the employee submits a statement of intention to be taxed jointly — where the employee's income exceeds PLN 120,000 and the spouse's income does not exceed this amount, the advances are then 12 percent in all months (Article 32(3) of the PIT Act)
Income tax advances and exceeding the threshold
The system for calculating income tax advances after exceeding the tax threshold changed significantly in 2020, affecting the way employers and payers calculate tax liabilities. The current rules provide a fairer and more proportional system for calculating advances.
Before the 2020 changes, exceeding the first tax threshold during a month meant that the advance was calculated at 32 percent on the whole salary in the month following the month in which the threshold was exceeded. This led to disproportionately high advances and cash-flow problems for taxpayers.
The current system provides for proportional calculation of the income tax advance in the month in which the threshold is exceeded. This means that the advance is calculated at 12 percent up to PLN 120,000, while the excess over this limit is taxed at 32 percent.
Proportional calculation of income tax advances means that both tax rates are applied in the month in which the threshold is exceeded. The part of income up to PLN 120,000 is taxed at 12 percent, and the excess at 32 percent
Employers and payers must monitor the income paid to taxpayers during the tax year. Payroll systems have to calculate cumulative income automatically and calculate income tax advances accordingly once the threshold is exceeded.
For taxpayers running a business and settling on their own, the rules for calculating advances are similar. An entrepreneur has to monitor their income and calculate monthly or quarterly advances accordingly once the limit is exceeded.
Advance calculation example: an employee had cumulative income of PLN 115,000 by November and receives a salary of PLN 8,000 in December. The advance will be: PLN 5,000 (up to the threshold) × 12% + PLN 3,000 (excess) × 32% = PLN 600 + PLN 960 = PLN 1,560, and where a PIT-2 statement (the taxpayer's statement for calculating monthly advances) has been submitted, reduced by 1/12 of the tax-reducing amount (PLN 300), i.e. PLN 1,260.
The new system of calculating advances provides greater tax fairness and avoids situations where taxpayers had to bear disproportionately high tax burdens in individual months. Proportional calculation of advances spreads the tax burden evenly over time.
Practical examples of tax calculation
Practical application of the second tax threshold rules is best illustrated by concrete examples showing how tax is charged in various financial situations. The examples below show the scenarios most often encountered in practice.
Basic example – exceeding the tax threshold: A taxpayer earned income of PLN 150,000 in 2026. The tax is calculated as follows:
- Tax on the first threshold: PLN 120,000 × 12 percent = PLN 14,400
- Deduction of the tax-reducing amount: PLN 14,400 - PLN 3,600 = PLN 10,800
- Excess income: PLN 150,000 - PLN 120,000 = PLN 30,000
- Tax on the second threshold: PLN 30,000 × 32 percent = PLN 9,600
- Total tax payable: PLN 10,800 + PLN 9,600 = PLN 20,400
The tax-reducing amount of PLN 3,600 is deducted from the tax calculated on the first tax threshold. In the Act (Article 27(1)) it is already included in the fixed amount of PLN 10,800: the tax on income above PLN 120,000 is PLN 10,800 plus 32 percent of the excess
Example with higher income: A taxpayer earned annual income of PLN 200,000. Detailed tax calculation:
- Tax on the first threshold: PLN 120,000 × 12 percent - PLN 3,600 = PLN 10,800
- Excess income: PLN 200,000 - PLN 120,000 = PLN 80,000
- Tax on the second threshold: PLN 80,000 × 32 percent = PLN 25,600
- Total tax: PLN 10,800 + PLN 25,600 = PLN 36,400
Borderline example – income exactly at the threshold: A taxpayer earned exactly PLN 120,000 of income a year:
- The whole income is taxed at 12 percent
- Tax before deduction: PLN 120,000 × 12 percent = PLN 14,400
- Tax after deducting the tax-reducing amount: PLN 14,400 - PLN 3,600 = PLN 10,800
Comparison of effective tax rates: a taxpayer with income of PLN 120,000 effectively pays 9% tax, with PLN 150,000 – 13.6%, and with PLN 200,000 – 18.2%. This shows the progressive nature of the tax system.
Taxpayers with income exactly at the PLN 120,000 limit do not exceed the first tax threshold and pay tax only at 12 percent, with the full tax-reducing amount deducted
Comparison with previous years
An analysis of changes to the tax threshold system over recent years shows how the Polish tax system has evolved towards greater social fairness and a lower tax burden. The most important changes took place in 2022 as part of a package of tax reforms.
Until June 2022 the first tax threshold was taxed at 17 percent, which meant a higher tax burden for all taxpayers settling under the general rules. The change introduced on 1 July 2022 reduced the first-threshold rate to 12 percent, bringing significant tax savings.
The second tax threshold remained unchanged at 32 percent throughout 2022, and this solution continues in 2026. The stability of the second-threshold rate gives higher-earning taxpayers predictability and allows long-term financial planning.
Reducing the first-threshold rate from 17 percent to 12 percent in 2022 (while the tax-reducing amount fell from PLN 5,100 to PLN 3,600) cut the tax on income of PLN 120,000 from PLN 15,300 to PLN 10,800, i.e. by PLN 4,500. For taxpayers exceeding the second threshold the saving was the same, because the excess is still taxed at 32 percent
An equally important change was raising the second tax threshold limit to PLN 120,000 under the Polish Deal (Polski Ład) package. Previously the threshold was much lower, which meant that more taxpayers were subject to the higher tax rate.
A comparison of the tax burden over the years shows the following differences:
| Year | First threshold | 1st threshold rate | Second threshold | 2nd threshold rate |
|---|---|---|---|---|
| 2021 | up to PLN 85,528 | 17% | above PLN 85,528 | 32% |
| 2022 (I-VI) | up to PLN 120,000 | 17% | above PLN 120,000 | 32% |
| 2022 (VII-XII) | up to PLN 120,000 | 12% | above PLN 120,000 | 32% |
| 2023-2026 | up to PLN 120,000 | 12% | above PLN 120,000 | 32% |
The stability of tax thresholds in 2023-2026 means that taxpayers can use the tax strategies they have developed without frequent adjustments.
Raising the second tax threshold limit from PLN 85,528 to PLN 120,000 meant that income falling between these amounts is taxed at the lower first-threshold rate. This change significantly reduced the number of people subject to the higher tax rate
Tax planning within the thresholds
Legal tax planning within the threshold system offers taxpayers various ways of reducing their tax burden while fully complying with the law. Proper planning of income and use of the available tax reliefs are key.
The available tax planning methods include:
- Spreading income over time to minimise exceeding the second threshold
- Using joint settlement with a spouse where income levels differ
- Strategic planning of the timing of revenue and expenses
- Making full use of tax-deductible costs
- Considering a switch to the flat tax at very high income levels
- Using the available tax reliefs and deductions
The basic planning strategy is to spread income over time in a way that minimises exceeding the second tax threshold. Entrepreneurs can plan the timing of invoices, services and sales of goods so as to avoid concentrating high income in a single tax year.
Joint settlement with a spouse is one of the most effective tax planning methods for families with large differences in income. This mechanism can lead to tax savings of even more than ten thousand zloty a year (PLN 13,200 in the example above).
Tax planning must be carried out within the current law and must not be artificial or sham. All planning measures should have an economic rationale and be consistent with the intention of the tax rules
Entrepreneurs may also consider switching to the flat tax where expected income significantly exceeds the second tax threshold. The flat tax of 19 percent may be more favourable than the tax scale for very high incomes, although this requires a detailed financial analysis.
Planning example: an entrepreneur with expected income of PLN 300,000 a year may consider the flat tax (19% = PLN 57,000) instead of the tax scale (PLN 10,800 + 32% × PLN 180,000 = PLN 68,400), which gives a saving of PLN 11,400 a year (tax only; the health insurance contribution is an additional 9% of income under the tax scale and 4.9% under the flat tax). However, under the flat tax you lose, among other things, the option of joint settlement with a spouse.
Strategic use of tax-deductible costs reduces the tax base and may keep income below the tax threshold. Entrepreneurs should keep proper documentation of all justified business costs.
Planning investments and purchases for the business can be synchronised with periods of higher income, allowing optimal use of tax costs. Investments in fixed assets, which can be depreciated in subsequent years, are particularly important.
The decision to switch from the tax scale to the flat tax as a rule applies for the whole tax year. The statement is filed by the 20th of the month following the month in which the first business revenue of the year was earned (or by the end of the year if the first revenue was earned in December), also via CEIDG (Central Register and Information on Economic Activity) — Article 9a(2) and (2c) of the PIT Act
Impact on different groups of taxpayers
The second tax threshold affects different groups of taxpayers in different ways, depending on the nature of their income, their family situation and their financial strategies. Analysing this impact helps to understand the social and economic consequences of the current tax system.
Employees are the largest group of taxpayers potentially affected by the second tax threshold. To reach the threshold of PLN 120,000 of annual income, an employee must earn a gross salary of about PLN 142,500 a year, which translates into about PLN 11,900 a month (after deducting the employee's social insurance contributions of 13.71% and the standard tax-deductible costs of PLN 250 a month).
Entrepreneurs running a business have more scope to manage their income and plan when the tax threshold is exceeded. They can influence the timing of revenue, plan investments and use various tax planning options available in their business.
Entrepreneurs can choose between the tax scale, the flat tax and ryczałt, while employees cannot change the form of taxation of their salaries — salaries are taxed under the tax scale. The choice of the form of taxation is crucial for the final tax burden
People in liberal professions, such as doctors, lawyers, architects or consultants, often exceed the second tax threshold because of the nature of their services and the level of their fees. For this group, proper income planning and use of the available tax reliefs are particularly important.
Married couples with different income levels can benefit significantly from joint tax settlement. This mechanism is particularly beneficial when one spouse has high income above the second threshold and the other has low income or is not working.
Pensioners rarely exceed the second tax threshold because of the level of retirement and disability pensions in Poland. However, people combining pension benefits with income from work or business may end up exceeding the tax threshold.
Joint settlement of spouses can bring tax savings of even more than ten thousand zloty a year where there are large differences in income between the spouses. The greater the difference in income, the greater the benefits
Young people starting their careers usually do not exceed the second tax threshold in their first years of work, but as their careers develop and their salaries grow, they may have to pay tax at the higher rate.
The second tax threshold applies to a small proportion of taxpayers — most often specialists, managers and entrepreneurs with income above PLN 120,000 a year. Tax at 32 percent is charged on the excess of their income.
