Running a business means aiming for a profit and looking for ways to keep the tax bill down. Business owners constantly look for ways to pay as little tax as possible while keeping the company financially stable, safe and able to grow. One of the most important tools available to a business owner is choosing the most favourable form of taxation, especially with regard to the tax-free amount (kwota wolna od podatku).
In 2026 the tax-free amount in Poland is still PLN 30,000, which is a significant advantage for taxpayers using the tax scale (12% and 32%). This form of taxation makes it possible to pay no income tax at all for people whose annual income does not exceed that amount. Understanding how the tax-free amount works and the rules for applying it is key to effective tax planning.
Rules for using the tax-free amount
The tax-free amount is available only to taxpayers who have chosen the tax scale. This form of taxation has two tax rates - 12% and 32%. In addition, where income exceeds PLN 1,000,000, the surplus above that limit is subject to an additional 4% solidarity levy (danina solidarnościowa).
The tax rate depends directly on the amount of income, which is calculated as revenue minus tax-deductible costs. A progressive system means that the higher the income, the higher the rate applied to the part above each successive threshold.
A tax-free amount of PLN 30,000 means that taxpayers whose income does not exceed that amount pay no income tax. This applies only to taxpayers settling under the tax scale and does not cover other forms of taxation
The tax-free amount works in a fairly simple way. If a taxpayer's income for the tax year does not exceed PLN 30,000, no income tax is payable. If income exceeds that amount, tax is charged only on the surplus above the tax-free amount.
A practical example is a business owner running a hair salon. If in 2026 they earned revenue of PLN 50,000 and their costs were PLN 45,000, their taxable income is PLN 5,000. As this does not exceed the tax-free amount, the business owner pays no income tax for 2026.
Taxpayers who paid income tax advances during the year but whose annual income did not exceed the tax-free amount will get the overpaid advances back. The overpayment is shown in the PIT-36 annual tax return (the return for business owners on the tax scale), and the tax office (urząd skarbowy) refunds it, as a rule, within 45 days of an online return or 3 months of a paper return (Article 77 § 1 points 5 and 5a of the Tax Ordinance Act (Ordynacja podatkowa))
History of changes to the tax-free amount
The tax changes introduced in the package known as the Polish Deal (Polski Ład) significantly increased the tax-free amount. Before these rules came into force the tax-free amount was much lower, which limited the benefit for lower-income taxpayers.
From 2022, the Polish Deal raised the tax-free amount to PLN 30,000, more than a threefold increase compared with the previous rules. The change was intended to ease the burden on lower-income taxpayers and increase their purchasing power.
Those who benefited most from the higher tax-free amount were employees on the minimum wage and business owners running smaller businesses. Raising the tax-free amount to PLN 30,000 meant that a significant part of their income is not taxed.
Taxpayers whose income does not exceed PLN 30,000 pay no income tax at all. Those whose income is above that amount but does not exceed the first tax threshold pay 12% tax on the surplus above the tax-free amount
The tax-reducing amount under the current rules
Until the end of 2021, income tax advances did not take the tax-free amount into account; a tax-reducing amount (kwota zmniejszająca podatek) was applied instead. It was a fixed amount of PLN 525.12 a year. The final settlement of this amount in relation to the tax-free amount took place only when filing the annual tax return. We calculate business owners’ tax advances and annual returns as part of our ongoing service — details on the page of our accounting firm in Warsaw.
The Polish Deal changes not only raised the tax-free amount but also adjusted the tax-reducing amount. With a tax-free amount of PLN 30,000, the tax-reducing amount was PLN 5,100 (17% of PLN 30,000) from 1 January 2022, and since 1 July 2022, after the rate was cut to 12%, it has been PLN 3,600 a year.
| Parameter | Value in 2026 | Basis | Use |
|---|---|---|---|
| Tax-free amount | PLN 30,000 | Article 27(1) of the PIT Act | Annual tax return |
| Tax-reducing amount | PLN 3,600 | 12% of the tax-free amount | Tax advances and annual return |
| First tax threshold | PLN 120,000 | Article 27(1) of the PIT Act | Tax scale |
| First-bracket rate | 12% | Article 27(1) of the PIT Act | Up to PLN 120,000 |
The tax-reducing amount is a simple calculation - it is 12% of the tax-free amount, i.e. PLN 30,000 × 12% = PLN 3,600. This amount is taken into account in income tax advances, so the relief can be used on an ongoing basis throughout the year.
Tax advances on business income take into account the full tax-reducing amount of PLN 3,600 a year. This means the relief can be used on an ongoing basis without waiting for the annual settlement
Impact on different groups of taxpayers
The higher tax-free amount affects different groups of taxpayers in different ways. Those with lower incomes benefit most, as PLN 30,000 may cover a large part or all of their annual income. This applies in particular to:
- Employees on the minimum wage
- Business owners starting a business
- People running a small-scale business
- Pensioners earning extra income alongside their benefits
- Students taking casual work
Remember, however, that these changes do not apply to all taxpayers. The tax-free amount exists only under the tax scale. Business owners who have chosen other forms of taxation will not benefit from it.
Business owners using the flat 19% tax (podatek liniowy), the flat-rate tax on recorded revenue (ryczałt) or the tax card (karta podatkowa) cannot use the tax-free amount. This relief applies only to taxpayers settling under the tax scale
Practical aspects of applying the tax-free amount
Applying the tax-free amount in practice requires understanding a few key points. First, the amount is settled over the tax year, which means that even if in some months income exceeds the monthly equivalent of the tax-free amount, the final settlement is made in the annual tax return.
Second, the tax-free amount applies to income, not revenue. This means that tax-deductible costs must be deducted from revenue before the relief is applied. For business owners this means they can deduct costs incurred to earn revenue or to preserve or secure the source of revenue, except for the expenses listed in Article 23 of the PIT Act (Article 22(1)). For employees it is applied differently, through monthly advances — how the employee tax-free amount works is explained separately.
The tax is calculated with the tax-free amount as follows:
- Calculate total revenue for the tax year
- Deduct tax-deductible costs
- Deduct social security contributions paid from the income (Article 26(1) point 2 of the PIT Act) - the result is the tax base
- If the tax base does not exceed PLN 30,000 - the tax is PLN 0
- If the tax base exceeds PLN 30,000 - tax is charged on the surplus
The tax-free amount applies to the combined income from all sources taxed under the tax scale. If a taxpayer has income from several sources, all of it is added together to determine taxable income
Tax planning with the tax-free amount
The tax-free amount can be used as part of a broader tax planning strategy. Business owners can plan their activities so as to get the most out of this relief. This is particularly relevant for people starting a business or running a seasonal business.
One strategy may be to spread revenue over time so that in some years it does not exceed the tax-free amount. This may be particularly beneficial for freelancers, consultants or people providing services occasionally.
Another aspect of planning is managing tax-deductible costs consciously. Planning business expenses properly can help keep income below the tax-free amount, especially for small-scale businesses.
A business owner running a consultancy planned their projects so as to earn income of PLN 28,000 in the first year of business. As a result, they paid no income tax and invested the money saved in growing the business, which enabled higher revenue in the following years.
Comparison with other forms of taxation
The choice between the tax scale and other forms of taxation should be preceded by a careful analysis of expected income. The tax-free amount may make the tax scale more favourable than the other options, especially for lower-income business owners.
The 19% flat tax offers no tax-free amount, which means that every złoty of income is taxed. For income not exceeding PLN 30,000, the tax scale is clearly more favourable.
The flat-rate tax on recorded revenue offers different rates depending on the type of business, but it also provides no tax-free amount. Ryczałt rates range from 2% to 17% depending on the nature of the business.
For income up to PLN 30,000 the tax scale with the tax-free amount is, as a rule, the most favourable option. At higher income levels, individual calculations reflecting the specifics of the business are needed
Records and settlements
Using the tax-free amount correctly requires keeping proper records. Taxpayers must be able to document their revenue and the costs they incurred. This applies in particular to business owners.
The basic documents needed to settle the tax-free amount are:
- Invoices and bills confirming revenue
- Documents confirming costs incurred
- Records of revenue and costs
- Bank documents confirming cash flows
- Contracts with business partners
The tax-free amount is settled in the annual tax return, which must be filed by 30 April of the year following the tax year. In the return the taxpayer reports total revenue and costs, on the basis of which taxable income is calculated.
Taxpayers using the tax-free amount must file an annual tax return even if their income did not exceed PLN 30,000. This obligation results from running a business or earning other taxable income
Tax planning for the future
The tax-free amount of PLN 30,000 remains unchanged in 2026 (no act changing it had been published by 8 November 2026), which makes tax planning more predictable. Business owners can use this information for long-term planning of their business and growth strategy.
Remember, however, that tax rules may change, so it is essential to follow the current regulations regularly. Tax planning should take into account not only the current rules but also expected future changes.
For people considering starting a business, the tax-free amount can be a strong argument for choosing the tax scale, especially in the early stages when income may be lower.
