You inspect your September report card and… your net salary drops without warning? No, your employer has not done anything illegal. The explanation may be found in the income tax withheld at source line on your bulletin.
The tax calendar shakes up in the fall. Shortly after receiving the property tax notices, the bank withdrawal of the balance of the 2023 tax has just fallen, on September 25 for more than 10 million households. The ultimate tax mishap: you discover on your September pay slip that your withholding tax increases suddenly. Scandal? Not sure. Most often, it is logical and automatic.
What to look for on your pay slip
Go to the bottom of your pay slip. The mention the reference net pay before income tax is most often the one that is highlighted: this is your usual net salary, excluding tax.
Then the bulletin details your withholding rate, the amount withdrawn in September 2023, and finally the net pay in euros, your net salary after income tax: this is the amount that is paid into your account. Simply compare your August and September 2023 bulletins to find out if your salary drop is due to an increase in your tax rate at source.
New pay slip: what is this new social net amount? What is it used for?
Why does this rate change in September?
But why now? Because the regulations set September 1 as the deadline from which the tax authorities can update the rate, downward… or upward. It’s now the same routine, every year.
In spring 2023, you declared your 2022 income. The General Directorate of Public Finances (DGFiP) then recalculates your personalized withholding tax rate based on your 2022 income.. And we have to wait until September for this updated rate to be applied.
Most often, this update is only visible from the pay slip received at the end of September. Or mid-September for taxpayers (landlords, self-employed, etc.) paying withholding tax installments. More rarely, this update of September 1 can be taken into account from the salary or retirement pension for the month of August, especially if the payment takes place at the beginning of September.
Source tax: should you check or even correct your new rate?
What to check on the tax website
Obviously do not hesitate to check that this update corresponds to that provided by the tax authorities. How? Direction impots.gouv.fr, special area, section manage my direct debit at source: click on consult your rates. The rate applicable to your September salary must appear opposite the date 01/09/2023. You can trace your last rate changes by clicking on previous situation.
What are your options for changing rates?
Two possibilities. The first: the rate increase applied by the DGFiP is unwelcome… You have just lost income (yourself or your spouse), during 2022. You can claim a reduction in your withholding rate if it is justified .
Click on the button update following an increase or decrease in income below the rate displayed in your space. The DGFiP then requests a estimate of your tax household’s 2023 income in order to adapt the tax rate.
Please note: the new amount of the withholding at source must decrease by at least 5% compared to the current withholding for the DGFiP to update your rate. If the DGFiP confirms the rate update, the reduction will be effective on your October or November salary depending on your employer’s accounting calendar. Only problem: you will have to repeat this approach in January 2024 to avoid a new rate increase.
Second possibility: couples where there is a large income gap can opt for the individual rate. This obviously does not change anything in the household’s tax level but it can soften an increase that is too heavy for the spouse who is subject to the other’s salary increase.
The DGFiP then applies a separate rate to each member of the household, proportionally to their individual resources. Choosing the neutral rate (non-personalized rate), however, has no impact on your monthly tax: a neutral rate appears on your form but the DGFiP deducts or reimburses the rest each month directly to your bank account.
Taxes: how to change the tax rate taken from your salary
Why doesn’t the final bill change anything?
So…scandal? Or not? If your income has increased in 2022, this month of September has in fact a double penalty: insufficiently withdrawn during 2022, you very probably have a balance drawn on September 25 from your account, and your rate skyrockets on the bulletin of the same month!
This unpleasant double surprise passes, the impact will be neutral on your annual tax bill. Like every year, the annual tax is calculated to the nearest euro in the spring following the declaration, in order to supplement or reimburse what has already been taken at source.
How to anticipate an increase in withholding rates
If your income continues to increase in 2023, you can already notify the Public Treasury, via the debit at source menu at impots.gouv.fr (update following an increase).
What interest for you? This approach will increase your rate, and therefore increase your monthly source tax… but this will avoid having too large a balance to be regularized in the fall of 2024. Unlike a drop in income, the upward discount does not is subject to no conditions.
Obviously nothing obliges you to request this rate increase. You are free to wait for the 2024 declaration to report the increase in your standard of living to the Public Treasury.