2. Personal Income Tax

Income from 129,408 million in 2024, 7.6% more than the previous year. This figure has contributed 40% of the increase in total revenue, despite being negatively affected by the impacts associated with regulatory and management changes, which reduced revenue collection by nearly 3.2 billion euros. Without these impacts, revenues would have increased by 10.2%, a figure consistent with an 8.5% growth in the base and a 2.4% growth in the average rate. Behind these strong increases lies the positive trend in employment, which continued to grow, albeit at a more moderate pace, coupled with increases in average wages and pensions and the resulting rise in the effective rate. Added to these factors is the strong growth in income associated with capital assets thanks to the positive performance of dividends and the notable recovery in interest income from bank accounts, which more than doubled the level reached a year earlier.

Gross household income grew by 8.5% in 2024, exceeding the rate of the previous year by more than one point ( Table 2.1 ), and linking three years with increases above 7%. The improvement compared to 2023 was due to the strong momentum in income from movable capital, capital gains, and business income, while labor income and rental income slowed compared to the previous year.

Labor income, the main component of household income, grew by 7.0% in 2024, a high rate but more than one point below that reached in 2023 ( Table 2.1 ), with smaller increases in all its components, with the exception of income associated with unemployment benefits. Wages, which have maintained a stable share of labor income over the last three years, around 68%, increased by 7% (7.9% a year earlier, Table 2.2 ). The slowdown in wage growth was concentrated in the private sector, particularly in large companies, with growth of around 10% in the first half of the year and 8.7% in the second. The year closed with a 9.3% increase. In SMEs the payroll grew by 4.8%, a similar rate to that of 2023, with a stable profile of around 5% from January to September, and slowing down to 4.3% in the last quarter. Overall, the private sector wage bill increased by 7.4% in 2024 (8.8% in 2023). The main cause of this trend was the slowdown in job creation and, in the last part of the year, the moderation of wage increases (Chart 2.1).

The public sector wage bill, on the other hand, grew more than in 2023, by 5.8% compared to the previous 5.1%, thanks to an increase in employment of 2.1%, three-tenths higher than the previous year, and a new increase in average incomes (3.6%), driven by the additional 0.5% increase in wages that occurred in July (Chart 2.2).

The public pension fund grew by 7%, down from 9.2% a year earlier, due to a two-and-a-half-point drop in average pensions, which increased sharply in 2023 due to revaluation based on peak inflation in 2022. On the other hand, the increase in the number of pensioners was slightly higher than the previous year (Chart 2.3). Private pensions increased after three years of decline, although this increase was not enough to maintain their proportion of the total pension fund. These pensions represented around 8% of the total between 1995 and 2010, after which they gradually declined in importance, reaching 3.3% of the pension pool by 2024.

Chart 2.4 compares the developments in average wages and pensions and consumer prices ( CPI ) since 2010. It is observed that, just as wage increases have not been sufficient to offset the rise in prices, in the case of average pensions, their evolution exceeds that of the price index. It should be remembered that the increase in the average pension not only reflects the annual increase, but also the upward effect of the larger increases in the lowest pensions and the higher level of new pensions added to the system compared to those already in it.

Finally, unemployment benefits increased again in 2024, surpassing the rate reached in 2023 (4.5% compared to 3.2%) due to the larger increase in the average benefit, which rose by 3.4%, while the number of unemployed remained at a rate of 1%, similar to that recorded a year earlier.

It is estimated that total household capital income grew by 22.6% in 2024, compared to the 3.2% estimated for 2023 ( Tables 2.1 , 2.4 , 2.5 and 2.6 ). This sharp acceleration is mainly due, as already noted, to the dynamism of capital income, which grew by 45.3%, following the already high 15.9% in 2023 and 26.5% in 2022. Following these increases, these incomes accounted for around 34% of total capital income in 2024, a share they had not reached since 2015. In 2024, they represented 30.767 billion in household income, the highest level in the series after those recorded in 2008 and 2009 (Chart 2.5), years before the full consequences of the financial crisis and, subsequently, the prolonged fall in interest rates became apparent. For households, this meant a drastic decrease in income from interest on bank accounts. In 2024, these rents more than doubled the level reached a year earlier. Even so, they are still far from reaching the weight they had in total household capital income in the past, as can be seen in Figure 2.6. Since 2015, the role of dividends has grown, so that between 2018 and 2023 they have represented an average of more than 76% of total household capital income, a percentage that fell to 70% in 2024, as interest became more important.

Capital gains are also expected to grow significantly, exceeding 22%. This growth is due, in part, to the dynamism of profits from investment funds, which represented around 12% of total capital gains in 2024 and, after two years of decline, grew by 79.3%, reaching 3.55 billion (Chart 2.7). On the other hand, for profits not subject to withholding, a 17% increase is expected. These gains are fundamentally linked to real estate sales and the evolution of the stock price, in both cases with better results in 2024 than in 2023 (Chart 2.8).

Meanwhile, rental income grew by 6.5%, a rate that also reflects the positive trend in these revenues, although it is more than one percentage point below the rate recorded in 2023.

Finally, it is estimated that personal business income grew by 9% in 2024, exceeding by almost four points the 5.1% observed in 2023 ( Table 2.8 ), with an improvement profile as the year progressed, going from 7.6% in the first quarter to 10.5% in the last.

The effective rate on gross household income increased by 2.4% (0.6% in 2023, Table 2.1 and Chart 2.9). Without the differential rate, the increase is estimated at 1.9% compared to 2.5% in 2023. As in previous years, the rate increase is due to increases in average wages and pensions, and would have been higher had the rate cuts for lower incomes not been made.

The accrued IRPF grew by 11.1% in 2024, marking four years of high growth. Between 2021 and 2024, the average rate of increase reached 10.7%, the result of an average increase in income of 7.5% and an average effective rate of 3% per year. Without the differential rate, the accrued IRPF increased by 10.5% in 2024, as a result of the increase in the bases of 8.5% and the effective rate of 1.9% ( Table 2.1 ).

Income in Personal Income Tax increased by 7.6% (9.9% in 2023), three and a half points below the rate reached by accrued taxes. The main reason for this discrepancy is that the latter includes the estimate of the accrued differential tax corresponding to the 2024 fiscal year, while the cash receipts reflect the income and refunds corresponding to the result of the 2023 annual tax return. Income excluding the annual return increased by 10%, a rate closer to that of accrued taxes excluding the differential rate (10.5%).

Income from withholdings from work and economic activities grew by 9% in 2024, thanks to income growth close to 7% and the higher average rate ( Table 2.3 and Chart 2.10). The increase is lower than in 2023, a consequence, as already seen, of the slower growth in labor income.

Once again in 2024, withholding taxes on capital income grew strongly. They did so by 40.8% after 26.7% last year ( Table 2.4 ). Withholdings from capital gains in investment funds also showed exceptional growth in 2024 (69.6%) and their amount was also among historical highs. It's important to remember the irregularity that characterizes these revenues (in 2023, revenues fell by almost half), with sharp declines and rapid recoveries, linked to the evolution of financial markets, interest rates, and their impact on the composition of household portfolios. For its part, withholdings for leases (mainly for premises) increased by 5.8% in 2024 (6.7% in 2023).

As regards personal company profits, fractional payments grew by 9.5% in 2024, a rate almost two points lower than that of accrued tax ( Table 2.8 ), a difference that is explained by the growing trend shown by these payments and the shift to the February 2025 cash register of the payment corresponding to the accrual of the fourth quarter of 2024.

Revenue associated with the annual tax return fell by 1.5%, while refunds grew by 16.5% (almost 2.2 billion euros more than the previous year). From the perspective of declared returns, the negative results are explained by the low growth in income from economic activities and the decrease in capital gains (especially those from the sale of real estate), most of which are reflected in the declaration. But this does not explain most of the decline, which has three main causes. The most significant outcome is the ruling in favor of mutual members, which resulted, on the one hand, in a reduction in the income received as pensions in 2023 in the tax return, reducing income and increasing refunds, and, on the other, in the return of those same amounts, but referring to prior years that had not yet expired, as requested through an appeal. To this must be added the reductions in the regional tax bracket (lower than in the 2022 declaration, but still significant) and the postponement to February of the second installment of the positive quota for taxpayers in the province of Valencia, a measure included within the rest of the actions aimed at alleviating the effects of the dana ( Table 1.5 ).

Finally, it should be noted that in 2022 the usual pattern of the annual settlement of the Allocation to the Catholic Church was broken again. This settlement was usually made in January for the outstanding balances from the declaration from two years prior. However, the amount corresponding to the 2021 financial year, which should have been paid in January 2023, was brought forward to December 2022. This is why refunds for this item in 2023 were about 230 million euros lower than those made the previous year and about 160 million euros lower than those paid in 2024.

Income from labor withholdings and economic activities in the private sector grew by 9.1% (8.7% if other labor withholdings are also included). The figure is more than one percentage point lower than that recorded in 2023. The wage bill slowed down, as mentioned, due to the slowdown in the pace of job creation, especially in SMEs . Salary increases, on the other hand, while remaining around 5%, were somewhat lower than in 2023. In Large Companies, the increase in revenue rose to 10.3% compared to 6.8% for SMEs Table 2.3 ). However, the impact of the modification of the reduction for work income must be taken into account, which benefited low wages, with a greater presence in SMEs . If the lost revenue for this reason is added together, growth in both types of companies would have been more similar: 10.6% for Large Companies and % for .

In the AA.PP. Income from labor withholdings grew by 9.7%, almost three points less than in 2023. The slowdown is explained by the slower growth in pension-related withholdings. In 2023, there was a sharp increase in pension funds due to the high revaluation resulting from the 2022 price increases. This led to an increase in withholdings of around 19% in 2023. In 2024, except for the first month that included December withholdings, the growth in these revenues was around 11.3%, with a 7% increase in the payroll and a 4% increase in the rate, also, as in the SMEs , affected downwards by changes in the reduction for employment income. Regarding public employees' salaries, withholdings grew by more than 8% (about 6% due to the total salary and the rest due to the increase in the effective rate), slightly higher than in 2023.