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Taxes, pensions and benefits: What changes in 2021?

The New Year will see adjustments affecting the daily life and finances of many.

Image: Mostphotos

The turn of the year will bring several changes to taxation and benefits in Finland. Among other things, 2021 will see a higher retirement age while compulsory education will be extended by two years to 18.

Higher income taxes

Income earners’ statutory contributions will increase, with unemployment insurance and health insurance premiums rising by 0.15 and 0.18 percentage points respectively. On average, the municipal tax rate will rise by 0.06 percentage points as 39 municipalities are raising their taxes. On the whole, wage earners can expect to see their income tax rates rise by an average 0.2-0.3 percentage points. Pensioners’ tax rates will remain unchanged.

Tax relief for mortgage holders drops

Image: Kimmo Hiltunen / Yle

In 2021, the mortgage interest rate deduction will fall to 10 percent from 15 percent, with the deduction rolled back entirely in 2023.

Higher retirement age

Image: Mostphotos

Individuals born in 1958 will be able to retire at the age of 64, as the lowest retirement age increases by three months. The upper age limit for pensions will also rise by one year to 69. People who continue to work after this age will not accrue pension. The rise in the pensionable age was the result of pension reforms implemented in 2017.

Higher housing subsidies for pensioners

Kela pays a housing allowance on the basis of certain costs. The threshold for costs considered by the agency when paying out the allowance will rise by 0.9 percent on 1 January for retirees.

More expensive heating

Heating costs will rise for many households as Finland increases taxation on fossil fuels. Homeowners using oil to heat single family homes will see their annual bills rise by an average of 74 euros. District heating costs for detached houses are expected to increase by an average of 38 euros a year.

Higher sin taxes

Image: Silja Viitala / Yle

Finland is raising the excise duty on alcohol. If increases trickle down to the consumer in full, prices of (33cl) beer, cider or long drink would rise by some three cents. The price of a class I beer would rise by 15 cents while a 75 cl bottle of wine would cost 22 cents more.

Cigarette packs will meanwhile cost 45 cents more following a tax hike.

Usage-based water fee schemes expand

Water usage fees have been based on the number of people in a household. Image: Matti Myller / Yle

Dwelling-specific water meters in newly constructed properties mean utility bills will increasingly be in line with actual usage. The rule comes into effect for builders seeking construction permits after November 2021. Existing housing companies will transition to the new system as buildings undergo pipe renovations and flat-specific meters are installed.

Cash-for-clunkers scheme

Car owners turning in vehicles that are at least 10 years old to be junked will get a rebate of 1,000-2,000 euros towards the purchase of a new car, electric bicycle or public transport pass. The programme is run by Traficom, the Finnish Transport and Communications Agency.

Bigger reimbursement for private Covid tests

Image: Ensio Karjalainen / Yle

Kela will up reimbursements for Covid PCR tests performed at private clinics from 56 euros to 100 euros. The increase will be in force throughout 2021.

Capital region public transport hike

Passengers will need to purchase tickets before boarding buses. Image: Karoliina Simoinen / Yle

The Helsinki Regional Transport Authority (HSL) will raise the price of adults’ monthly passes by three euros, while the price of annual tickets will decrease. The price of one-time and 24-hour tickets will not change. Passes for seniors over the age of 70 will be slightly cheaper.

Bus drivers in the capital area will no longer sell tickets to passengers. The pandemic put an end to in-bus ticket purchases this past spring, and now the transport authority has decided to make the change permanent.

More expensive passports

Image: Ismo Pekkarinen / AOP

Citizens applying for passports in-person will see charges rise to 58 euros from 51. The price of renewing passports online will stay the same at 52 euros.

The price of police-issued ID cards will rise from 54 to 55 euros (in-person application) and 48 to 49 euros (online).

Finland extends compulsory schooling

As of 1 August, education will be compulsory to the age of 18 from the current limit of 16. Secondary education will also become free of charge. This means that students will not have to provide their own textbooks or other equipment. The change will initially apply to those born in 2005.