In March’s salary, employees earning more than NIS 16,150 per month, will receive several hundred more shekels net pay, after the revised income tax brackets came into effect through the initiative of Minister of finance Bezalel Smotrich, as part of the approval of the 2026 budget.
Income tax brackets in Israel are designed to tax those who earn more at a higher rate than those who earn less. Thus, up to a monthly income of NIS 10,000, 10% income tax is paid, then a 14% tax bracket and additional brackets up to 47% - above a monthly income of NIS 60,130, there is also a 3% surtax.
The approved budget changes the income range of two tax brackets: 20% and 31%. The 20% tax bracket will be widened, so that instead of its range being between a monthly income of NIS 10,061 and NIS 16,150 per month, it will be revised up to NIS 19,000 per month.
The next tax bracket, 31%, will start at NIS 19,001 per month and instead of being up to NIS 22,440 per month, will be revised upwards to NIS 25,100 per month. Accordingly, the next tax bracket - 35%, will start at NIS 25,101 per month.
The update of the brackets is supposed to be carried out automatically in the payroll systems of employers in the economy, so starting with the March salary, which is paid in April, many employees are already supposed to see the impact of the wider tax bracket spread on their net pay.
employees entitled to retroactive tax rebates
The Israel Tax Authority believes that some employees won’t benefit from the revised tax brackets until their April salary. However, this will not negatively affect employees as the update applies retroactively starting in January 2026. "The payroll systems have already been adjusted to the new brackets," explains CPA Yoram Shifer, partner at accountancy firm Ziv, Shifer & Co. "In the cumulative calculation, after changing the tax brackets, we will reach a situation that shows that the tax collected in the first months of the year is higher than the tax that should have been paid, and therefore in the March salary there will be a rebate for every employee starting with a salary of NIS 16,150. Anyone whose salary is lower than NIS 16,000 gross will not be affected by the change in the salary brackets."
What will be the amount of the rebate?
"On a salary of up to NIS 16,150 there is no tax savings. On a salary of NIS 18,000 there will be a benefit of NIS 203 per month; on a salary of NIS 20,000 - NIS 313 shekels; on a salary of NIS 24,000 - NIS 375 shekels, and on a salary of NIS 25,100 - NIS 420. Above NIS 25,100 it still remains NIS 420. Since the amount is refunded retroactively for January and February as well, in the April slip people may see a rebate of NIS 1,200."
Is there an impact on the self-employed as well?
"The self-employed will not see a change. They need to do a check of the tax advances they pay against estimated income. It is possible that a self-employed person can reduce the advances they pay by NIS 5,000 and they should do this check."
Tax Adjustments: The Tax Authority will perform a proactive update
This week, the Tax Authority also sent instructions regarding tax adjustments for 2026, following the income tax bracket adjustment. It clarified that employees who made a tax adjustment during 2026 are not required to update it following the bracket adjustment. If their expected annual income is less than NIS 193,800 - they will not be affected by the legislation. If their expected annual income is higher than NIS 193,800, the Tax Authority will undertake the required update for them proactively.
Employees who did not make a tax adjustment in 2026, although they are required to do so - are asked to wait to do so until a notification is received in the tax adjustment system about the system being updated in accordance with the new legislation. Due to the Passover holiday, the Tax Authority decided to extend the validity of tax adjustments from 2025, until May 13 2026.
Published by Globes, Israel business news - en.globes.co.il - on April 5, 2026.
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