Personal tax is the tax that you as a private individual pay on your taxable income.

Taxable income is calculated as follows:

• Personal income
• + / – Capital income
• – Deductions under the Danish Tax Assessment Act
• = Total taxable income

Personal tax is progressive, which means that the tax rate increases the higher your income is.

Personal tax also covers other taxes such as municipal tax, basic tax, top tax, extra top tax and labour market contribution.

Business tax is the tax that a person pays on retained profit of a business under the Business Tax Scheme.

The tax rate is a fixed 22%.

The business income is calculated, and the part of the business profit that is withdrawn by the self-employed person is taxed as personal income.

The part of the business profit that is not withdrawn is retained and taxed with an on-account business tax of 22%.

Changes in your income or deductions can have a significant impact on your personal tax.

Changes in income:

• If your income increases, for example due to a pay rise, bonus or extra work, you should update your preliminary income assessment to ensure that the correct tax is withheld. Otherwise you may risk residual tax in the annual tax statement.
• If your income falls, for example due to a job change, reduced working hours or illness, you may get excess tax back.

Changes in deductions:

• If you get more deductions, for example for pension contributions, trade union fees or business-related expenses, this can reduce your taxable income and the tax you have to pay.
• If you lose a deduction, for example because you are no longer a member of a trade union or can no longer deduct certain expenses, this can mean that you have to pay more tax if it was included in your preliminary income assessment.

It is therefore important to update your preliminary income assessment as soon as possible if your income or deductions change.

Several common mistakes can lead to too much or too little tax and residual tax in the annual tax statement.

One of the most common mistakes is forgetting to update the preliminary income assessment when income or deductions change. In other cases, income is incorrectly classified as personal income or capital income.

Examples:

• Reporting interest expenses related to self-employment in the wrong field, which can cause you to pay too much or too little tax.
• Receiving share-based remuneration where it must be determined whether it is personal income or share income.

Typical mistakes in total tax payments also include forgetting deductible expenses such as interest on private loans, transport deduction, charitable donations, pension contributions, home improvement deduction, service deduction and other employee deductions.

It can be a good idea to seek advice about personal tax when your finances become more complex or when changes may affect your tax.

Advice can be relevant if you:

• Have several sources of income such as salary, share-based remuneration, freelance work, pensions or fees
• Lack an overview of possible deductions
• Have foreign matters such as work abroad, foreign income or stays abroad
• Receive staff benefits such as company car, housing or other benefits, where different tax rules apply depending on the benefit