How much money will you get back in your pocket, now that Jamaica’s government is moving to eliminate personal income tax for everyone who earns less than 2 million Jamaican dollars?
So this was the announcement from Finance Minister Fayval Williams as she opened the 2025 budget debates.
The threshold for personal income tax, also known as PAYE (Pay As You Earn), is currently 1.7 million Jamaican dollars per year. That’s about 10-thousand US dollars.
This means that anyone who earns less than that, doesn’t pay income tax. If you earn more, you pay 25% tax on all your earnings above the threshold.
Raising the threshold to 2 million from 1.7 million means that an extra 300-thousand dollars of your income will be exempt from taxes.
That 300k would’ve have been taxed at 25%, so that’s 75-thousand dollars back in your pocket for the year. Or about $6,250 a month.
But hold up. She did say that this would be phased in. So you won’t get that total savings until 2027.
So what’s the immediate benefit? Effective April 1, 2025, the income tax threshold will move to 1.8 million dollars. So you will see a small increase on your payslip at the end of April.
How small? It’s only about $2,000, so you can buy an extra KFC for the month.
Here’s the math real quick, if you’re interested. Moving from 1.7 to 1.8 million means that an extra 100-thousand dollars of your income will be exempt from taxes.
That 100k would’ve been taxed at 25%, which is 25-thousand dollars for the year, or about $2,083 a month.
It’s not a lot, but it’s better than nothing, and certainly better than higher taxes. And keep in mind, this is the third time the income tax threshold has been raised since the JLP has been in power.
Back in 2016, they campaigned on a promise to double the threshold from about 700-thousand to 1.5 million. And I believe that campaign promise was a big part of them winning the election. They then raised it again in 2024 to 1.7 million.
Now personally, I’d like to see personal income tax abolished altogether. Too few people are actually paying it because it’s very easy to under-report your income, or not report it at all.
The Holness Administration has made a big push to move from direct taxes like PAYE to more indirect taxes like GCT, which is a tax on goods and services that’s basically unavoidable. Of course, there are some exemptions for basic food items.
I was hopeful that because ONE - they have extra money available because they’re spending less on debt now; TWO - this is an election year; and THREE - the polls are showing a very tight race; that they would’ve had gone ahead abolished income tax completely.
I mean hey, it worked the first time. They came to power on the 1.5 promise. Abolishing income tax could’ve been that thing that sealed the deal for a third term. But they’re going to 2 million, mmm, I’ll take it. I’m just happy for any extra money these days.
And that’s the bottom line!
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