Luxembourg Parliament approves the introduction of a single tax class from 2028

On 28 October 2026, the Luxembourg Parliament adopted Draft Law No. 8676 introducing a single tax class for individual taxpayers as from 1 January 2028. The vote marks a key milestone in one of the most significant reforms of Luxembourg personal income taxation in recent decades.

The reform will replace the existing tax classes 1, 1a and 2 with a single tax class, referred to as tax class “U”, reflecting a fundamental shift in the Luxembourg personal income tax system from taxation based on the family unit (also referred to as collective taxation) to taxation at the individual level.

• Luxembourg Parliament has adopted Draft Law No. 8676 introducing a single tax class from 1 January 2028.

• The current tax classes 1, 1a and 2 will be replaced by a new single tax class, referred to as tax class “U”.

• Existing married couples and registered partners may remain under the current collective taxation system during a 25-year transitional period.

• The reform includes several accompanying measures aimed at mitigating the impact of the transition towards individual taxation.

A single tax class from 2028

The reform will introduce a new single tax class (tax class U) as from 1 January 2028, replacing the current tax classes 1, 1a and 2.

The reform marks a shift towards individual taxation. The new tax class U will apply to taxpayers currently falling within classes 1 and 1a, as well as to couples marrying, or entering into, a registered partnership from 2028 onwards.

Transitional regime for existing couples

Married couples and registered partners already benefiting from collective taxation (tax class 2) before the reform may remain under the existing system during a 25-year transitional period.

They may also choose for individual taxation under the new regime (tax class U), but this choice will then be definitive and irrevocable going forward.

Accompanying measures

The reform is accompanied by several measures aimed at mitigating the impact of the transition towards individual taxation, including:

• a €5,400 allowance per child under the age of three;

• an increase in the single-parent tax credit;

• higher deduction ceilings for certain special expenses and childcare/domestic costs; and

• an automatic adjustment of the tax scale following four indexations.

Effective date

The new single tax class and related measures will apply from 1 January 2028.

Conclusion

The adoption of the reform marks an important milestone in the transition towards individual taxation in Luxembourg. Its impact will vary depending on each taxpayer’s personal and family circumstances, namely for married couples depending on the allocation of income between spouses or partners.

Want to learn more about the reform? Explore our insights on the rationale behind the new system, its practical implications and its impact on different taxpayer profiles.

• Why a single tax class? Rethinking fairness in Luxembourg’s personal tax system

• Luxembourg income tax reform: what changes in practice for taxpayers?

• Introduction of a single tax class for individual taxpayers: who actually wins and who loses?