Reduction in payroll tax for all island workers
A targeted move to increase the take-home pay of Bermudian workers and stir economic activity comes in the shape of a lower tax burden for employees, the Premier said.
David Burt announced a “significant reduction” in payroll taxes in his Budget Statement, insisting that people should be able to retain more of what they earn.
Businesses were promised that no one will pay more in payroll taxes and that most will receive a reduction in the levy.
However, Mr Burt, who is also the finance minister, stopped short of taking on a recommendation from the Tax Reform Commission to cap higher rate bands for the employer portion at 7 per cent.
He told the House of Assembly today: “On the issue of relief, this Budget delivers a significant reduction in payroll taxes.
“Every working Bermudian will see a reduction in their payroll tax burden and no person working in Bermuda will pay more in payroll tax under this Budget.
“No business will pay more in payroll taxes and most businesses will receive a reduction in payroll tax.
“At a time when families are dealing with the pressures of housing costs, food prices and everyday expenses, this government believes that people should be able to keep more of what they earn.”
Mr Burt said that making sure no worker in Bermuda will pay more in payroll tax represented “a deliberate policy to increase the take-home pay of Bermudians and to stimulate activity in our local economy”.
He added: “The Government is providing relief to the employers, ensuring that we can reduce their cost of doing business.”
Several categories of employer payroll tax will be affected by lower rates, including the addition of nursing homes to a 3 per cent rate, “to reduce their expenses as they care for a growing senior population”.
Additionally, Mr Burt said: “The employer portion of payroll tax is to be exempted on the first $96,000 of remuneration for Bermudian employees aged 65 and over, an initiative to support seniors who want to remain in the workforce.”
The following employer payroll tax rates will decrease from April 1:
International business (exempted undertakings): rate will decrease from 10.25 per cent to 9.75 per cent
Large local employers (remuneration greater than $1 million): rate will be reduced from 10 per cent to 9.5 per cent
Rates will be reduced for all medium-sized businesses (remuneration between $200,000 and $1 million) by 0.5 per cent
Hospitality (hotels, guesthouses and restaurants): rate will be reduced from 5 per cent to 4 per cent
Retail (special retail group): rate will be lowered from 6 per cent to 5 per cent
Bermuda Hospitals Board, corporations of Hamilton and St George: rate will move from 3.5 per cent to 3 per cent; nursing and rest homes will be added to this category to reduce their expenses, as they care for a growing senior population
Self-employed caregivers: employer payroll taxes will be eliminated
Local dividend exemption is being raised from $10,000 to $20,000
The Government is also maintaining the 0 per cent or 1 per cent rates for small businesses, charities and economic empowerment zones.
• Information from the 2026-27 Budget Statement presented by David Burt, the Premier and Minister of Finance
The TRC, in its report published last August, recommended “a reduction in the employer portion of payroll tax rates, effectively capping the higher rate bands at 7 per cent for all taxpayers”.
It added: “It is estimated that this measure will reduce government revenue by approximately $68 million per annum …
“The Tax Reform Commission further recommends that consideration be given to additional rate reductions in future with the objective of reducing the maximum employer rate to 5 per cent, subject to analysis of the outcomes achieved by the initial round of rate reductions and levels of CIT revenue that is experienced.”
The report said that benefits of reducing the employer rate of payroll tax included stimulating job growth and incentivising hiring, as well as enhancing the attractiveness of the island as a place to locate employees.
Most of the 14 employer payroll tax categories listed in the Budget Statement will have rates of 7 per cent or less.
However, large local companies with annual payroll greater than $1 million will see their rate decrease from 10 per cent to 9.5 per cent, and international businesses with exempted undertakings will note a reduction from 10.25 per cent to 9.75 per cent.
Mr Burt said: “Moving to the employee payroll tax, this government is delivering a comprehensive reduction in the tax burden for all people working in Bermuda.
“This will be achieved through a targeted adjustment of our marginal tax bands, ensuring that all workers have a tax reduction.”
From April 1, he told MPs, the employee payroll tax rate for earnings up to $48,000 will be reduced from 0.5 per cent to 0.25 per cent, and for earnings from $48,001 to $96,000, the rate will decrease from 9.25 per cent to 7.75 per cent.
In Band 3 — earnings from $96,001 to $200,000 — the rate will increase from 10 per cent to 10.75 per cent.
Rates for bands 4 and 5 — earnings of $200,000 to $500,000 and $500,000 to $1 million respectively — will remain the same at 11.5 per cent and 12.5 per cent.
Mr Burt said: “It is essential to ‘spell this out in full’ so there is no confusion.
“Because our system is marginal, every worker, regardless of their total salary, benefits from the lower rates in the first two bands.
“These savings more than offset the adjustment in the third band, resulting in a net tax cut for everyone.”
He provided illustrative examples: “A worker earning $48,000 will see their annual tax drop from $240 to $120 — a 50 per cent reduction.
“A public officer earning $96,000 will see their bill drop from $4,680 to $3,840 — a direct saving of $840 per year.
“For a professional earning $120,000, the tax bill drops from $7,080 to $6,420 — putting $660 back into their pocket.”
• To see the Budget Statement in full, see Related Media
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