When people look at a Dutch payslip, they often focus on the tax rates. But the rates are only half the story. Two tax credits do a huge amount of the work in deciding how much you actually keep: the algemene heffingskorting (general tax credit) and the arbeidskorting (labour tax credit). Together they can be worth thousands of euros a year, yet most workers could not tell you how they work.
This guide explains both credits in plain English, shows how they change as your income rises, and helps you see why two people on the same gross salary can take home very different amounts.
What a Tax Credit Actually Does
It is important to understand the difference between a deduction and a credit. A deduction lowers the income you are taxed on. A tax credit (heffingskorting) is better: it is taken directly off the tax you owe. If your calculated tax is EUR 10,000 and you have EUR 4,000 of credits, your bill falls to EUR 6,000.
In the Netherlands, these credits are usually applied automatically through the payroll (loonheffing), so you see the benefit every month rather than waiting for a refund. That is why your net pay is much higher than a simple rate calculation would suggest.
The General Tax Credit (Algemene Heffingskorting)
The algemene heffingskorting is available to almost everyone who pays Dutch income tax. It is a base credit that reduces the tax of low and middle earners the most. For 2026, the maximum general tax credit is around EUR 3,400 for people below the AOW (state pension) age.
The key thing to understand is that this credit is income-tested. It is at its full value for lower incomes, then it gradually reduces as your income rises. Once your income passes a certain point, the credit tapers down toward zero. This taper is one reason the effective tax burden on middle incomes is higher than the headline rates suggest.
- Low earners: Receive close to the full general tax credit.
- Middle earners: See the credit gradually reduced as income climbs.
- High earners: May receive little or none of this particular credit.
To see how the general credit affects your own pay, use our salary calculator, which builds these credits into the net figure automatically.
The Labour Tax Credit (Arbeidskorting)
The arbeidskorting rewards people who work. You only get it on income from employment or self-employment, not on pensions or benefits. It is one of the largest credits in the system, and for many workers it is worth more than the general credit.
For 2026, the maximum labour tax credit is around EUR 5,500. Like the general credit, it follows a curve. It rises as your earnings increase from a low base, reaches a peak for middle incomes, and then tapers down for higher earners.
This design is deliberate. The government wants to make work pay, especially for people moving from benefits into a job or increasing their hours. If you are a part-time worker thinking about working more, the arbeidskorting often means your extra hours are taxed more lightly than you expect.
Why Two People Can Take Home Different Amounts
Imagine two people each earning EUR 45,000 a year. One earns it all from a salaried job. The other receives part of it as a pension and part as casual income. The salaried worker gets the full labour tax credit on their earnings, while the pensioner gets little or none on the pension portion. The result is a real difference in net pay, even though the gross figure is identical. This is why our salary comparison calculator can be so useful when weighing up different types of income.
Other Credits You Might Qualify For
Beyond the two main credits, there are several smaller ones worth knowing about.
- Inkomensafhankelijke combinatiekorting: A credit for working parents with a young child, designed to support combining work and care.
- Ouderenkorting: An extra credit for people who have reached the AOW age, on top of the general credit.
- Jonggehandicaptenkorting: A credit for younger people who receive disability support.
These credits are layered on top of the main two, and they too are usually applied automatically once the Belastingdienst (Dutch Tax Authority) knows your situation.
How Credits Interact With the 30% Ruling and Self-Employment
If you are an incoming worker using the 30% ruling, your tax-free portion changes how the credits apply, because your taxable income is lower. Our expat tax calculator handles this interaction so you can see the real net result.
For the self-employed, the labour tax credit still applies to your profit, alongside business-specific reliefs such as the zelfstandigenaftrek. Because these reliefs are being reduced over time, the labour tax credit has become an even more important part of a freelancer's net income. Model your numbers with our self-employed tax calculator before setting your rates.
Getting the Credits Right
Check you are not claiming twice. If you have more than one employer, only one should apply the heffingskorting through payroll. Applying it twice leads to a tax bill later.
Update your situation. Becoming a parent, reaching the AOW age, or changing jobs can all change which credits you qualify for. Keep your details current with your employer and the Belastingdienst.
Do your annual return. Even though credits are applied monthly, your yearly tax return (aangifte) settles the final amount. If your income changed during the year, the return makes sure you received the right credits.
A Worked Example
It helps to see the credits in action. Consider a single worker earning EUR 40,000 a year from employment in 2026. The headline income tax on that amount, before any credits, might come to roughly EUR 14,000 once you apply the Box 1 rates to the taxable income.
Now apply the credits. The general tax credit could be worth around EUR 2,800 at this income level, since the taper has reduced it from the maximum. The labour tax credit, which peaks for middle earners, could add roughly EUR 4,800. Together that is about EUR 7,600 taken straight off the tax bill, bringing it down toward EUR 6,400. The credits have nearly halved the tax due.
This is why headline tax rates give such a misleading picture of the Dutch system. The rates look high, but the credits pull the effective burden down sharply for low and middle earners. The exact figures depend on your precise income, so always check your own numbers with our salary calculator rather than relying on round estimates.
How the Taper Affects Pay Rises
Because both main credits reduce as income rises, a pay rise in the taper zone is taxed more heavily than the headline rate suggests. For part of the middle-income range, every extra euro can lose value not only to income tax but also to the shrinking credits. Economists call this a high marginal rate.
This does not mean a pay rise leaves you worse off, you still keep more overall, but it does mean the extra take-home from a raise can be smaller than you hoped. It is a useful thing to understand before negotiating, and a reason to look at net rather than gross when comparing offers using our salary comparison calculator.
The Bottom Line
The Dutch tax credits are not a minor footnote. The algemene heffingskorting and arbeidskorting together can be worth the better part of EUR 9,000 a year for the right earner, and they explain most of the gap between gross and net pay. Understanding how they taper is the key to predicting your take-home pay accurately. Use our salary calculator to see exactly how the 2026 credits shape what lands in your bank account.