The Government’s Budget Statement introduced notable revisions to Bermuda’s payroll tax framework. At Abacus, we remain dedicated to keeping you informed of these updates and their potential impact on your business operations.
These changes are designed to ease the burden on employees, stimulate hiring, and support businesses across key sectors. Below is a breakdown of the updates that will take effect from April 1, 2026.
Employee Payroll Tax Cuts
Workers across Bermuda will see lower rates in the first two income bands, meaning more take-home pay and immediate relief for households. This adjustment ensures that every employee benefits directly from the reforms.
Employer Payroll Tax Reductions
Employers in large, medium, hospitality, and retail sectors will enjoy reduced payroll tax rates. These cuts build on a series of reductions since 2017 and are intended to encourage job creation, strengthen competitiveness, and support economic growth.
The new tax rates are as follows:
| Employer Payroll Taxes | |||
| Employer Payroll Tax Categories | Previous Rates | New Rates | Change |
| Annual payroll <$200,000 | 1.00% | 0.50% | -0.50% |
| $200,000 ≤ Annual payroll ≤ $350,000 | 2.50% | 2.00% | -0.50% |
| $350,000 ≤ Annual payroll ≤ $500,000 | 5.25% | 4.75% | -0.50% |
| $500,000 < Annual payroll ≤ $1,000,000 | 7.50% | 7.00% | -0.50% |
| Annual payroll > $1,000,000 | 10.00% | 9.50% | -0.50% |
| Exempt Undertakings | 10.25% | 9.75% | -0.50% |
| Gov., Gov. Boards, Parish Council, & BDA College | 0.00% | 0.00% | 0.00% |
| Self Employed Farmers, Fisherman, & Caregivers | 0.00% | 0.00% | 0.00% |
| Educational, Sporting, or Scientific Institutions | 1.00% | 1.00% | 0.00% |
| Charities, Schools, Religious and Cultural Organisations | 0.00% | 0.00% | 0.00% |
| Economic Empowerment Zone | 0.00% | 0.00% | 0.00% |
| BHB, Corp of Hamilton and St Georges, Nursing Homes with annual payroll of more than $350,000 | 3.50% | 3.00% | -0.50% |
| Qualifying Retail | 6.00% | 5.00% | -1.00% |
| Hotels & Restaurants with Annual payroll ≥ $350,000 | 5.00% | 4.00% | -1.00% |
| Employee Payroll Tax Rates | |||
| Income Bands | Previous Rates | New Rates | Change |
| $0 – $48,000 | 0.50% | 0.25% | -0.25% |
| $48,001 – $96,000 | 9.25% | 7.75% | -1.50% |
| $96,001 – $200,000 | 10.00% | 10.75% | 0.75% |
| $200,001 – $500,000 | 11.50% | 11.50% | 0.00% |
| $500,001 – $1,000,000 | 12.50% | 12.50% | 0.00% |
New Hire Relief 2026
Replacing the 2024 program, the New Hire Relief 2026 incentivizes employers to expand their workforce:
- Applies to Exempted Companies and employers with remuneration exceeding $500,000.
- Employers must demonstrate an increase in full-time equivalents (15+ hours per week) compared to their Jan–Mar 2025 baseline.
- Qualifying hires between Apr 1, 2025 – Mar 31, 2026 (still employed after Apr 1, 2026) and Apr 1, 2026 – Mar 31, 2028 are eligible.
- Relief applies only to the employer portion of payroll tax.
- Applications must be submitted within the quarter; retroactive approvals are not permitted.
Senior Employment Relief
Employers hiring or retaining Bermudians aged 65 and above can claim payroll tax relief. This measure supports continued workforce participation among seniors. Note that bonus payments remain taxable. The quarterly threshold paid to an employee is up to $24k per tax period. This means that any remuneration paid to an employee is not taxable if it is under $24K per tax period and any dollar amount greater than $24K is taxable.
Caregiver Excemption
Self-employed caregivers providing in-home support for individuals with illness or incapacity will pay 0% employer portion payroll tax. Caregivers must still file quarterly returns for the employee portion.
Dividend Deduction Increase
The deductible amount on dividends rises to $20,000 per person per year. Any dividends above this threshold will be taxed as gross remuneration, subject to the $1 million ceiling.
Compliance Considerations
- Relief applications must be filed on the relevant quarter.
- Employers should maintain accurate records of baseline staffing, contracts, and payroll data.
- Relief does not apply to bonus payments.
- Businesses should prepare for audits by keeping thorough documentation of qualifying hires and relief claims.
The 2026–2027 payroll tax reforms represent a bold step toward economic relief and growth. By reducing burdens on both employees and employers, the Government aims to strengthen Bermuda’s workforce, support caregiving roles, and encourage investment in local talent.
We encourage you to review your financial plans and strategies considering these updates.
Contact Abacus for Assistance
At Abacus, we are committed to providing our clients, neighbors, and fellow business owners with the latest updates and advice on how to navigate the changing tax landscape in Bermuda. If you have any questions or concerns, please do not hesitate to contact us today.
Thank you for your continued trust in our services.