What is left of a pay rise after tax? Bracket creep explained
A tariff rise is announced as a gross percentage. What reaches your account is the net pay – and there the gain is always smaller than the announced percentage. The reason is called kalte Progression (bracket creep). This article shows, using the latest rise, how big the gap really is – computed with the salary calculator’s tax model, not a rule of thumb.
Gross is not net
The comparison below takes the Eckentgelt in Baden-Württemberg including the Leistungszulage (performance bonus) as the reference salary and converts the latest tariff rise into net for each tax class:
Gross/month
+3.1 %
+€128.23 2025 → 2026
Net/month
+2.6 %
+€68.24 tax class 1
Of the gross rise, net keeps
53.2 %
tax class 1
| Tax class | Net before | Net after | Net gain/month | Net rise | Share of gross rise |
|---|---|---|---|---|---|
| 1 | €2,675.69 | €2,743.93 | +€68.24 | +2.6 % | 53.2 % |
| 3 | €3,005.19 | €3,080.35 | +€75.16 | +2.5 % | 58.6 % |
| 4 | €2,675.69 | €2,743.93 | +€68.24 | +2.6 % | 53.2 % |
| 5 | €2,333.94 | €2,397.85 | +€63.91 | +2.7 % | 49.8 % |
Counter-direction: the Grundfreibetrag (basic tax-free allowance) rose €12,096.00 → €12,348.00 (2025 → 2026). At the new gross, that adjustment alone gives back about €9.17 net per month in tax class 1 – partly offsetting bracket creep.
Estimate — not tax advice. Actual figures may differ.
The result surprises many people: only about half of the gross gain survives as net. The percentage net increase sits noticeably below the gross percentage.
Why bracket creep shrinks the share
Income tax does not rise linearly with income but progressively: each additional euro is taxed at a higher marginal rate than the last. A pay rise consists of exactly those additional euros – so it is taxed at the upper, more expensive edge of your income. Social contributions come on top. That is why the net share of a rise is smaller than its gross share. If prices rise at the same time, a nominal increase can even become a real loss although the tax schedule itself is unchanged – that is the essence of kalte Progression.
The counter-direction: adjusted tax parameters
The legislator partly offsets bracket creep by lifting the Grundfreibetrag (basic tax-free allowance) and the tariff thresholds. That is exactly what happened for the current tax year: the tax-free base was raised, as the note under the table shows with the concrete figures. This adjustment gives back part of the extra progressive burden. Both directions belong together – naming only one distorts the picture.
Closing the loop with inflation
Whether a rise protects purchasing power is decided by net pay after inflation. The gross view of that is in the article Pay rises vs. inflation: there you can see that the tariff table has fallen behind prices in real terms since 2018. Combine both – the smaller net share here and the real shortfall there – and it becomes clear why a nominally decent rise is often barely noticeable day to day.
Your own case is best worked out directly in the salary calculator: set your tax class, church tax and federal state and see gross and net for your actual salary. The FAQ section answers further questions.