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Overview
The Budget for the 2026 legislature was presented to the Maltese Parliament on the 27th of October 2025, highlighting Malta's continued strong economic performance and having the highest economic growth in the European Union.
Further to high inflation observed over 2024, previous measures to counteract the effects of the rising cost of living in Malta appear to have been effective, with the jurisdiction having seen a decrease in inflation from 5.6% in 2023 to 2.5% in 2024 and now expecting a further decrease to 2.2% in 2025 – this also in line with similar trends witnessed across the EU.
However, the effects of the rising cost of living continue to be felt by those who are most vulnerable, such as pensioners and low-income families. This is evidenced by a number of social measures featured in this year's Budget, such as the various increases in pensions and other allowances.
High on Government's agenda were measures designed to increase investment in digital innovation and AI, with environmental initiatives taking more of a back seat in this year's Budget.
In addition, this year's Budget had a heavy social focus with a variety of new social measures being introduced, the highlight of these being the introduction of new income tax brackets for taxpayers with children.
For another year running, no new taxes were introduced.
Economic Overview
Gross Domestic Product
Real GDP growth of 3.1%, driven primarily by domestic demand and exportation of services.
Inflation
Annual inflation is anticipated to stabilise at 2.2%.
Tourism
Over 2.2 million tourists visited Malta in the first 7 months of 2025 resulting in an increase in tourist spending of 19.1%
Government Debt
The deficit for 2025 is expected to come in at 3.3% of GDP, a slight decline from the 3.5% deficit previously expected, with further reductions in the deficit being expected in the coming years. The debtto-GDP ratio is expected to amount to 47.1% for 2025 with further decreases expected.
Personal Income Tax Measures
One of the key highlights of the 2026 Budget was the introduction of new income tax brackets featuring increases in tax-free thresholds for certain families, in an effort to address Malta's declining birth rate. New tax brackets will be introduced for:
- married couples with one child;
- single parents with one child;
- married couples with two or more children;
- single parents with two or more children;
These will be implemented over a period of three years, as detailed in the following slides.
Personal Income Tax Measures
Married Couples with One Child
| Income (€) | Rate | Subtraction 2026 (€) | Subtraction 2027 (€) | Subtraction 2028 |
| 0 - 17,500 | 0% | 0 | 0 | 0 |
| 17,501 - 26,500 | 15% | 2,625 | 3,000 | 3,375 |
| 26,501 - 60,000 | 25% | 5,275 | 6,000 | 6,725 |
| 60,001 + | 35% | 11,275 | 12,000 | 12,725 |
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