In Germany, two tax bills meant to apply from 1 January 2027 are now before the Bundestag: the Income Tax Reform Act 2027 (Einkommensteuerreformgesetz 2027) and the Annual Tax Act 2026 (Jahressteuergesetz 2026). The finance committee heard expert witnesses on them on 2 and 4 November 2026. For freelancers and sole traders, four points matter: a new income tax scale, a higher top rate, a higher flat tax on mini-jobs, and tax interest that doubles.
Watch out: Both are government drafts. The Bundestag and the Bundesrat, the chamber of the federal states, still have to approve them, and any figure in this post can change on the way (as of November 2026).
The new income tax scale
If you work as a sole trader (Einzelunternehmer) or a partner in a partnership, your profit is taxed under income tax, so the tax scale in section 32a of the Income Tax Act (EStG) applies to you directly. The government draft (Bundestag document 21/8235) sets these thresholds for taxable income (as of November 2026). What counts is not your turnover but your profit after special expenses and allowances:
| Threshold | 2026 (current law) | 2027 (draft) | 2028 (draft) |
|---|---|---|---|
| Basic allowance (Grundfreibetrag) | €12,348 | €12,564 | €12,900 |
| 42% rate from | €69,879 | €70,601 | €70,601 |
| 45% rate from | €277,826 | €250,000 | €250,000 |
| 47% rate from | – | €280,000 | €280,000 |
At the lower and middle end, the draft brings a small relief: the tax-free basic allowance rises and the 42% rate starts a little later. At the top end, tax goes up. The 45% rate, known in Germany as the Reichensteuer, starts almost €28,000 earlier, and a new 47% band begins at €280,000. The government names the higher top rate as the way the relief is paid for.
At the committee hearing, the criticism was clear. Several experts said the relief does not offset bracket creep (kalte Progression), the effect of inflation pushing incomes into higher rates. The Federal Chamber of Tax Advisors warned that the higher top rates burden successful small and mid-sized businesses, and one economist pointed out that they also hit partnerships.
If you run your business as a GmbH or UG, the company pays corporation tax instead. The new scale then reaches you mainly through your managing director's salary.
Mini-jobs and home improvement work
If you employ someone on a mini-job and pay their wage tax at the flat rate, that gets more expensive from 1 January 2027. The flat tax under section 40a(2) EStG is set to rise from 2% to 5% of the wage (as of November 2026, document 21/8235). According to the explanatory notes, the rate has not changed since it was introduced more than twenty years ago. On a wage of €500, the flat tax would be €25 instead of €10.
A second change is a private one. The tax credit for tradespeople's work in your home (Handwerkerleistungen, section 35a EStG) is set to fall from 20% to 15% of the labour costs, and the annual cap from €1,200 to €900 (as of November 2026).
Tax interest doubles
The change almost every self-employed person will feel is in the draft Annual Tax Act 2026 (document 21/8283). When the tax office raises an assessment after the fact, it charges interest on the back payment, and when it refunds tax, it pays interest. Under section 233a of the Fiscal Code (AO), interest starts running 15 months after the end of the year in which the tax arose.
Today the rate under section 238(1a) AO is 0.15% per full month. The draft raises it to 0.3% per month from 1 January 2027, which is 3.6% a year (as of November 2026). The new rate is meant to apply to all interest arising after 31 December 2026, even when the tax itself belongs to an earlier year. It works both ways: if you get money back, the tax office will also pay 0.3% a month on the refund.
An example: for tax year 2025, interest starts running on 1 April 2027, so it runs entirely at the new rate. If the tax office assesses a back payment of €4,000 in April 2028, twelve full months have passed: €4,000 × 0.3% × 12 = €144 in interest. At today's rate it would be €72.
Tip: If your profit rises sharply, you can ask the tax office to adjust your income tax prepayments (Vorauszahlungen). The closer they are to the final tax, the smaller the back payment that interest is charged on later.
What this means for you
- Estimate your 2027 profit early. If your taxable income is close to €250,000, talk to your tax advisor (Steuerberater) about the new bands before the year starts.
- File on time and keep prepayments realistic. From 2027, a late back payment costs twice as much interest.
- Re-plan mini-jobs. Budget 5% instead of 2% flat tax in your wage costs from January 2027.
- Expect a smaller credit for home repairs: 15% of labour costs, capped at €900 a year.
- Follow the process. Figures can still shift until the Bundestag and Bundesrat vote, and your tax advisor will know the current status.
Whether the new scale affects you comes down to your profit, and you only know that early when your expenses are recorded as you go. With Bonro you photograph receipts right after a purchase, the app suggests the category and the SKR03 account, and your tax advisor gets the expenses as a DATEV Buchungsstapel. Try Bonro
Sources
- Drucksache 21/8235 – Entwurf eines Einkommensteuerreformgesetzes 2027dserver.bundestag.de
- Drucksache 21/8283 – Entwurf eines Jahressteuergesetzes 2026dserver.bundestag.de
- Anhörung zum Einkommensteuerreformgesetz 2027bundestag.de
- § 32a EStG – Einkommensteuertarifgesetze-im-internet.de
- § 233a AO – Verzinsung von Steuernachforderungen und Steuererstattungengesetze-im-internet.de
- § 238 AO – Höhe und Berechnung der Zinsengesetze-im-internet.de
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