Estonian basic exemption 2026: 700 € for everyone

What changed?

From 2018 to 2025 a regressive system applied: the exemption shrank as income grew and disappeared entirely at higher salaries. That caused unpleasant surprises in the annual tax return when people earned more than forecast.

From 2026 the exemption is the same for everyone: 700 € per month. For those of old-age pension age it is 776 € per month. A raise or bonus can no longer eat your exemption.

How the old sliding formula worked

In 2023-2025 the basic exemption was up to 7848 € a year, or 654 € a month. It applied in full up to an annual income of 14,400 € (1200 € a month). Above that it fell in a straight line and disappeared completely at 25,200 € a year (2100 € a month).

In practice, between 1200 € and 2100 € a month every extra euro earned cost part of the exemption, so the real marginal tax rate in that band was well above the statutory one. Below is the monthly exemption at various salaries under the old formula.

• 1200 € a month or less: 654.00 €.
• 1300 € a month: 581.33 €.
• 1500 € a month: 436.00 €.
• 1800 € a month: 218.00 €.
• 2000 € a month: 72.67 €.
• 2100 € a month or more: 0 €.

How much does it affect net pay?

A 700 € exemption means no income tax (22%) is charged on your first 700 euros per month - worth up to 154 € per month compared to no exemption at all.

Example: with a 2000 € gross salary, the net is 1657.84 € with the exemption and 1503.84 € without it. The difference is exactly 154 € per month, or 1848 € per year.

Step by step: 1500 € gross

The exemption does not reduce the social contributions withheld from pay, only the income tax base. This example shows where in the calculation the 700 € comes in. Settings: 2026, pillar II at 2%.

• Gross salary: 1500.00 €.
• Unemployment insurance 1.6%: 24.00 €. Pension 2%: 30.00 €.
• Taxable income: 1500 - 24 - 30 - 700 = 746.00 €.
• Income tax 22%: 164.12 €. Net pay: 1281.88 €.
• Without the exemption: income tax 318.12 € and net pay 1127.88 €.

2025 vs 2026: same salary, different net pay

The income tax rate was 22% in both 2025 and 2026, so the whole difference below comes from the exemption change alone. The comparison uses a 2% pension contribution.

At low salaries the gain is 10.12 € a month, because the exemption rose from 654 € to 700 €: 46 € × 22%. The biggest winners are people earning 2100 € or more, who previously had no exemption at all and now get the full amount. At 2100 € net pay rose from 1579.03 € to 1733.03 €.

• 886 €: 810.08 € (2025) → 820.20 € (2026), +10.12 €.
• 1200 €: 1046.18 € → 1056.30 €, +10.12 €.
• 1500 €: 1223.80 € → 1281.88 €, +58.08 €.
• 2000 €: 1519.83 € → 1657.84 €, +138.01 €.
• 3500 €: 2631.72 € → 2785.72 €, +154.00 €.

When pay is below 700 euros

A part-time employee's salary can be lower than the exemption. Payroll then applies the exemption up to the gross salary and no income tax is withheld. For example, at 600 € gross unemployment insurance is 9.60 €, the pension contribution 12.00 €, income tax 0 € and net pay 578.40 €.

Unemployment insurance and the pension contribution are withheld even when there is no income tax. In the annual return the exemption is counted per year (8400 €), so if pay is lower in some months and higher in others, the result evens out at year end.

The exemption at pension age

People of old-age pension age get a higher flat exemption: 776 € a month in 2024-2026 and 704 € a month in 2023. Unlike the general exemption, it did not shrink with income in earlier years either.

In 2026 the pension-age advantage over the general exemption is 76 € a month, which makes a 16.72 € difference in income tax. If you receive a pension and a salary at the same time, the higher amount applies in only one place, just like the general exemption.

• 886 € salary, 776 € exemption: income tax 17.18 €, net pay 836.92 €.
• 1500 € salary: income tax 147.40 €, net pay 1298.60 €.
• 2000 € salary: income tax 253.44 €, net pay 1674.56 € (1657.84 € with the general exemption).

The application: one employer at a time

To apply the exemption, file an application with your employer. The critical rule: the application may be active with only one payer at a time. File it with two employers and the exemption is applied twice - you will owe tax with the annual return.

• One job: file the application with that employer.
• Several jobs: file it only with your main employer (usually the highest salary).
• Working and receiving a pension: choose whether the employer or the Social Insurance Board applies it.

Example: two jobs, application filed with both

Suppose you work in two places, each paying 1000 € gross, and you filed the application with both employers. Each deducts 700 €, 1400 € a month in total, although you are entitled to 700 €.

During the year everything looks fine because net pay is higher. In spring the tax return shows that 1848 € too little income tax was withheld, and that amount has to be paid to the state.

• Income tax at each job with the application: 58.08 €, net pay 905.92 €.
• Income tax at the second job without it: 212.08 €, net pay 751.92 €.
• Tax under-withheld: 154 € a month.
• Amount owed after the year: 1848 €.

What if you do not file it?

Then income tax is withheld from your full gross salary and you overpay during the year. You get the overpayment back next spring with the tax return. Not lost money, but an interest-free loan to the state - better to file the application.

The amounts are noticeable: on the 946 € minimum wage net pay is 711.31 € without the application and 865.31 € with it. Any salary of at least 700 € plus social contributions gives the same 154 € a month, or 1848 € a year, waiting to be refunded until the following spring.

Common mistakes with the basic exemption

These situations most often lead either to net pay that is too low or to extra tax due with the annual return.

• Starting a new job without filing the application, so tax is withheld from the full salary for months.
• Changing jobs while the old employer's application stays active, even though a final payment is still coming.
• Filing the application at a side job "just in case", so the exemption applies twice.
• A person of pension age applying the exemption to both the pension and the salary.
• Using calculations based on the old sliding formula to estimate 2026 pay.
• Assuming the exemption also reduces unemployment insurance and the pension contribution.

Checklist

If you have changed jobs, taken on extra work or reached pension age, go through these points.

• Check on your payslip that the basic exemption line shows the amount you expect.
• Make sure the application is active with only one payer.
• On reaching pension age, check that 776 € rather than 700 € is applied.
• If pay is below 700 € in some months, remember the final result is settled in the annual return.
• Work out your expected net pay in the calculator and compare it with the actual payment.

Check your numbers with the calculator

Our basic exemption calculator shows how much income tax is withheld from your salary, and the salary calculator gives the full picture: net pay, all taxes and the total employer cost. The year selector also shows results under the 2023-2025 sliding system.