The 2026 Budget brings several updates that directly affect Malta’s workforce: from cost-of-living adjustments to new tax bands for families and expanded leave benefits. While the focus this year remains on supporting working families, there are also steps toward long-term workforce planning and talent development.

How will it affect you as a worker in Malta? Read on to find out!

A €4.66 Weekly COLA Increase

All employees will benefit from a Cost of Living Adjustment (COLA) of €4.66 per week. This automatic increase reflects the ongoing rise in living costs, ensuring that wages keep up, at least in part, with inflation (forecasted to remain at a stable 2.2%).

The COLA is one of the few measures that impacts nearly all workers across the board. It’s a modest but essential adjustment that helps offset higher household and daily expenses.

Revised Tax Bands for Working Families

This can probably be said to be the highlight of this year’s Budget. In an effort to provide better financial support for parents, the government has announced new “parent” and “married” tax rates that will come into effect over the next three years.

Under this reform, families with children under 18, or under 23 if they’re still in full-time education, will benefit from reduced income tax through new tax brackets. Two new bands will be introduced: one for families with a single child, and another for those with two or more children.

Couples with no children who don’t qualify for these new categories, such as households where only one spouse is employed, will continue to be taxed under the existing “married” rates. The result is a more nuanced tax system that takes family size and circumstance into account, aiming to make work more financially rewarding for parents.

Work-Life Balance: Expanding Leave Entitlements

The government plans to begin consultations with stakeholders on improving maternity, paternity, and parental leave, with the aim of better supporting working parents and aligning Malta with EU standards.

In addition, a new Neonatal Care Leave will be introduced for parents whose newborns require intensive or extended medical care immediately after birth. Importantly, the cost of this leave will be covered by the government, reducing the burden on employers and ensuring parents can prioritise their child’s wellbeing.

For self-employed individuals, there’s progress too. They will now be entitled to bereavement leave, miscarriage leave, and up to eight weeks of parental leave following the birth, adoption, fostering, or legal custody of a child, a first for Malta’s self-employed workforce.

These changes are a positive shift toward more inclusive, compassionate employment policy, one that recognises the diverse realities of modern working life.

Rewarding Loyalty: Wage Support for Long-Term Employees

A new incentive introduced in Budget 2026 aims to reward long-term employees while helping employers manage wage costs.

If you’ve been working with the same company for four years or more, the government will cover 65% of your wage increase, up to €780. In Gozo, the support is even higher, where 80% of the wage increase will be covered, up to €960. The measure encourages staff retention and recognises long-term commitment, while easing the pressure on employers to fully absorb salary increases during a time of rising costs.

Supporting Business Investment: Updates to the MicroInvest Scheme

Budget 2026 also introduced changes to Malta Enterprise’s MicroInvest scheme, which helps businesses expand and modernise their operations.

Key updates include:

• The maximum tax credit rising to €65,000, covering up to 65% of eligible costs
• Gozo enterprises retaining their 20% additional bonus
• For specific business categories, aid increasing to €85,000
• New eligibility for investments aimed at improving productivity or starting new ventures, with a 60% tax credit spread over four years (for projects completed within two years)
• AI-related investments now qualifying for a 175% tax benefit, with an accelerated two-year tax write-off
• An ‘AI for All’ initiative covering the cost of accredited AI training and premium software subscriptions (such as Gemini or ChatGPT Plus)

These changes suggest a growing policy focus on innovation and digital readiness, potentially making it easier for smaller enterprises to invest in new technologies and skill development.

Investing in Skills and Talent

Looking to the future, the Budget also announced the creation of a Malta National Talent Register – a nationwide database designed to map skills across industries and align training programmes with actual workforce needs.

This initiative aims to bridge the gap between education and employment, ensuring that workers, especially young professionals and career changersm, are better equipped for the jobs Malta’s economy needs most.

Additionally, a new scheme will encourage youths of Maltese descent aged 18–30 who live abroad to return to Malta for work or study opportunities, helping strengthen the country’s talent pipeline and international connections.

A Step Forward… But Work Still to Do

Budget 2026 may not be transformative, but it reflects an important direction: supporting families financially, modernising leave structures, and preparing for the future of work.

As cost-of-living pressures persist, these measures offer some relief and recognition of the challenges facing Maltese workers. As always, the real impact will depend on how effectively these promises are implemented, and how well they respond to the evolving realities of work and family life in Malta.

What was your reaction to this year’s budget? Does it address the average workers’ main concerns or is it purely cosmetic?

Share this article with a friend or colleague.