Ayuso prepares an IRPF reduction for almost three million

The draft regional budget for 2027 amounts to 32,911.5 million euros in non-financial expenditure, the highest figure ever for the Community of Madrid. Among the measures included is a new reduction in the IRPF, which the Isabel Díaz Ayuso Government plans to bring before the Assembly in the first quarter of the year, likely in March.

The initiative would need to be approved before the dissolution of the Madrid Parliament and the regional elections scheduled for 23 May. If passed, it will apply to the 2027 tax year and be reflected in the following year’s income tax return.

The reduction will be half a point across all regional brackets. The minimum rate will drop from 8.50% to 8%, while the maximum will fall from 20.50% to 20%. The Community estimates that the change will mean savings of 500 million euros and will benefit 2.9 million taxpayers.

According to regional estimates, 71% of beneficiaries will have incomes below the average salary in Madrid, which stands at 35,000 euros gross per year. The Administration calculates that the savings will be 635 euros compared to an average taxpayer in Catalonia and 555 euros compared to one in Castilla-La Mancha.

The Economy Minister, Rocío Albert, confirmed the measure when presenting the budget draft for parliamentary processing. She argued that the Community already had the lowest IRPF in Spain and maintained that the new reduction fulfils a promise by the regional government.

The draft includes six other tax reductions. For the purchase and sale of works of art, a 100% discount on the Transmisiones Patrimoniales tax is proposed. It is also proposed to reduce this tax from 6% to 4% on the purchase of a main residence of second-hand property by those under 40.

For new housing for those under 40, the Impuesto de Actos Jurídicos Documentados would drop from 0.75% to 0.4%. The other measures are linked to the Sierra Oeste fire in the summer: they include a 100% discount on the Impuesto de Donaciones for individuals for amounts up to 10,000 euros. They would also cover the purchase of vehicles replacing those lost and the acquisition of properties replacing those damaged by fire, with 100% discounts on the corresponding taxes.

The planned non-financial expenditure exceeds that of 2026 by 2,247.8 million, an increase of 7.3%. If the European funds from the Mecanismo de Recuperación y Resiliencia, now ended, are excluded, the increase is 9.2%. Compared to the first budget of the legislature, that of 2024, expenditure has grown by more than 5,350 million, a rise of 19.4%.

The accounts include a 4.5% salary increase from January 2027 for more than 250,000 public employees of the regional Administration. This will include senior officials, including ministers, but will exclude the president, whose salary remains frozen.

Ayuso’s annual salary is 103,090.32 euros and has not changed since she took office in 2019; the presidential salary has been frozen since 2010. Ministers are set at 124,851.84 euros in the 2026 budget. Vice-ministers and general directors also earn more than the president. Salaries are calculated based on the Secretarías de Estado salaries communicated by the Ministerio de Hacienda, with the increases for 2025 and 2026. A secretary of state receives 135,708.5 euros gross per year.

Healthcare will have 10.6% more funding and Education 11.2% more. The allocations for Healthcare will rise by 1,168.9 million euros; Educación, Ciencia y Universidades will receive an additional 780.7 million. Familia, Juventud y Asuntos Sociales will add 616.7 million. Together, these three areas will reach a record figure of 19,918.8 million euros and will exceed 2,500 million in increases.

Investment in public healthcare staff will rise by 541.2 million, or 9.24%, reaching 5,853 million. Of this budget, 35 million will go to on-call shifts, nights and holidays, with Saturday recognised as a special day; the measure will benefit more than 60,000 professionals. Another 22 million will fund new programmes and strategic actions. Among them, the reduction of surgical waiting lists, which will receive 6.7 million more, an increase of 25.6%.

In Education, the reduction of class sizes, already completed in the second cycle of Infant Education and in ESO, will be extended to third year of Primary next year. The classroom limit will drop from 25 to 20 pupils and nearly 1,000 new teachers will join public education. Grants and study aid will rise by 10.6%, to 283.8 million euros. In the current school year, more than 520,000 students benefit from the Accede free book loan programme.

Housing will have a budget of 552 million euros to promote the construction of affordable and social housing and to help young people access their first home. To expand the stock of affordable rental housing, 78.3 million is reserved, compared to 38 million in the initial 2026 budget, an increase of 105.8%. At the municipal level, the City Council is preparing another housing plan with 9,000 affordable homes planned for 2027.

The regional macroeconomic outlook forecasts growth of between 2.2% and 2.4% in 2027, three tenths above the national average. Madrid has 7.2 million inhabitants, 14.5% of Spain’s population, and contributes 20% of the national PIB. The regional unemployment rate is 7.6%, compared to the national 9.9%.

The IRPF reduction was already included in the electoral programme with which Ayuso won the 2023 elections. The president applied another half-point reduction in the 2022 tax year. The Community estimates that by the end of the legislature it will have carried out 41 tax reductions since 2019, 13 of them related to housing. The 35 approved so far, which will remain in place, have, according to the regional government, resulted in savings of nearly 48,000 million euros.