Tax changes in Estonia in 2026: all changes point by point (income tax, tax-free income, second pension pillar, social tax, VAT, excise duties, land tax and motor vehicle tax, “hobby groups”)

📊 “Was → Became” table: key tax changes in 2026

1) Income tax and tax-free income: when to choose 700 and when to choose 0

What changed

From 2026, tax-free income will be fixed and will not decrease as income increases.

• 700 € per month – standard tax-free allowance

• 776 € per month – for pensioners

The calculation is now simpler and more predictable.

How this affects salary

The employer applies the tax-free income allowance only on the basis of an application submitted by the employee.
If the application is missing or has not been updated, the amount of tax withheld may be higher than actually necessary.

When it is worth choosing €700

Usually when:

• has one primary employer;

• income is stable;

• there is no additional income.

In that case, more money will remain in hand each month.

When to choose €0 or a smaller amount

A safer option may be to reduce the tax-free income allowance or set it to zero if:

• has several employers;

• there is rental income, dividends, or additional work;

• income fluctuates.

Tax-free income can be applied by only one payer. Applying it in several places may result in an obligation to pay additional income tax.

An employer cannot apply unused tax-free income retroactively later — the final calculation is made in the annual tax return.

2) Second pension pillar: 2%, 4%, and 6% and the impact on net salary

2026. during the year, the second-pillar contribution can be:

• 2% – default rate;

• 4% or 6% – by voluntarily increasing it.

A higher contribution rate temporarily reduces net salary but increases pension savings. This is not a tax increase, but voluntary saving.

To have the new rate applied, the application must be submitted no later than the end of November.

3) Social tax: the change employers will feel the most

The social tax rate remains 33%, but the minimum base has changed:

• minimum base – 886 €

• minimum social tax – 292,38 € per month

This means that employees with a low workload may become more expensive for the employer, and companies may pass the costs on through service prices.

4) Unemployment insurance contribution

2026. rates will not change during the year:

• 1,6% from the employee;

• 0,8% from the employer.

For pensioners, employee contributions may cease in certain cases in accordance with the applicable rules.

5) VAT — why a price increase feels like a tax increase

The standard VAT rate is 24%.

Isegi kui tulumaksumäär ei muutunud, võib hinnatõus olla märgatav, sest käibemaks on juba enamiku kaupade ja teenuste hinnas. Seetõttu tajutakse hinnatõusu sageli kui uusi makse, kuigi tegelikult on see olemasoleva käibemaksu ja aktsiiside mõju.

In practice, prices are affected more by indirect taxes — value-added tax and excise duties.

6) Excise duties in 2026 — the main driver of price increases

As of 1 January 2026, alcohol and tobacco excise duties increased in accordance with the state's excise policy.

From 1 January 2026

• alcohol excise duty +10%;

• tobacco excise duty +10%.

From 1 May 2026

Increase in energy excise duties:

• petrol — approximately 621 € per 1000 litre;

• diesel — approximately 459 € per 1000 litres;

• natural gas — umbes 66,58 € per 1000 m³;

• electricity — umbes 3,07 € per MWh.

These changes also affect the prices of services, transport and everyday expenses.

7) Land tax — a greater role for local governments

Starting in 2026, land tax will depend to a greater extent on the decisions of the local government.

Local governments may determine:

• tax increase limits

• the extent of the homeowner tax benefit

Therefore, land tax amounts may vary considerably by region.

8) Motor vehicle tax — system clarifications

The motor vehicle tax was introduced earlier, but clarifications will be made in 2026:

• vehicle categories;

• benefits;

• calculation rules.

This is not a new tax, but a development of the existing system.

9) “Hobby clubs”, training and childcare

Training expenses remain eligible for tax relief, but only expenses that meet the conditions stipulated by law are taken into account.

The following may be taken into account:

• licensed training courses and educational institutions

• children's extracurricular activities, if the service provider meets the requirements

• private kindergartens and childcare under certain conditions

Restrictions:

• up to 1200 € per year (including donations and gifts)

• deductions up to 50% of taxable income

10) 2027 tax return for 2026: how to avoid tax debt

Tax debt usually arises when:

• the tax-free allowance was applied by multiple employers;

• additional income was earned during the year;

• jobs were changed and applications were not updated.

Practical recommendation

In the case of unstable income, it may be safer to choose 0 € — any overpayment will be refunded through the tax return.

With stable employment, you can use 700 €, but keep track of additional income.

2027. at the beginning of the year, a tax return is submitted via e-MTA and the final calculation is made.

11) Summary: what changed in taxation in 2026

⚠️ Important

We have tried to compile the 2026 tax changes as accurately as possible based on official sources.
If you notice an inaccuracy or would like to add something — write to us and we will update the article.

🔗 Sources used

• https://www.emta.ee

• https://news.err.ee/1609893193/overview-2026-excise-duties-and-other-tax-changes

• https://www.pensionikeskus.ee

• https://www.grantthornton.ee

• https://www.cobalt.legal

• https://globaltaxnews.ey.com