Budget 2027: Good News for Taxpayers! More Tax Relief and More Money to Keep

Budget 2027: Good News for Taxpayers! More Tax Relief and More Money to Keep

When we talk about Budget announcements, we usually hear about billions of ringgit allocated for infrastructure, subsidies and various government programmes. What does this mean to us, the taxpayers? What about the money that stays in our own pockets?

For many working Malaysians, especially those in the M40 income group, Budget 2027 has some welcome news. The government has announced an increase in individual tax relief from RM9,000 to RM12,000, together with lower tax rates for selected income bands and more expenses eligible for tax relief.

Why is this important? Because when the cost of living keeps increasing, every ringgit we can save matters.

#1: Personal tax relief increases from RM9,000 to RM12,000

According to The Star’s report on Budget 2027, the individual tax relief limit will increase from RM9,000 to RM12,000. This is the first revision since 2010.

That is an additional RM3,000 in personal tax relief.

Does this mean everyone will receive RM3,000 in cash? No.

Tax relief reduces the amount of income subject to tax. It is not a direct cash payment. The actual tax savings depend on the taxpayer’s chargeable income and applicable tax rates.

Still, this is a welcome adjustment. The cost of living has changed considerably since 2010, and personal tax relief should not remain unchanged indefinitely while household expenses increase.

The government estimates that the combined increase in tax relief and reduction in tax rates will provide approximately five million taxpayers with additional disposable income of up to RM1,600. More money back into the pockets meant more money to be spent. Good also for the economy, right?

That is money which could help households manage their expenses, build savings or invest for the future.

#2: Lower tax rates for selected income bands

There is more good news.

Under Budget 2027, the tax rate for resident individuals with chargeable income between RM70,001 and RM100,000 will be reduced by one percentage point, from 19% to 18%. Yes, this is the typical salary for the M40 group.

For chargeable income between RM100,001 and RM150,000, the rate will fall from 25% to 24%. Depending on how much one is able to save versus just spending all they earn, this salary range does give the earner a comfortable life lah. Surely can afford a home, a car and probably a handphone which is not a basic model.

These are marginal tax rates, meaning they apply to the relevant income bands rather than to all of a taxpayer’s income.

For those who fall within these bands, the changes could provide additional savings on top of the higher personal tax relief.

Of course, taxpayers in different income brackets will experience different outcomes. But the direction is positive: the government is providing some relief to taxpayers who have been managing rising household costs.

#3: More everyday expenses can qualify for tax relief

This is another part of Budget 2027 worth paying attention to.

The government has announced expanded individual tax relief categories, including:

• Medical expenses: Coverage will be expanded to include postnatal care services.
• Care for parents and grandparents: Relief will cover care-related expenses more broadly, rather than being restricted to healthcare.
• Sports equipment: The eligible category will include sports shoes.
• Education and skills: Course and skills-training fees will cover all fields of study, alongside tuition fees for children.
• Lifestyle expenses: Eligible expenses will include artificial intelligence (AI) subscriptions.
• Pet-related expenses: Relief will cover vaccination costs and the adoption of pets from registered centres.

These changes reflect how household spending has evolved.

For example, parents may be paying for children’s tuition, adults may be upgrading their skills to remain competitive at work, and families may be supporting elderly parents.

The inclusion of AI subscriptions is particularly interesting. Technology is changing the way people work, and access to AI tools may help some workers improve their productivity or develop new skills. Yes, of course I intend to subscribe too since now it can be included under lifestyle expenses. What about you? Do you already have an AI subscription today?

However, do check the detailed eligibility conditions and limits before claiming any relief. An expense being mentioned in the Budget does not automatically mean every payment qualifies.

#4: Is there any catch?

Naturally, a Budget needs to balance different priorities.

While many taxpayers will benefit from the higher relief and lower rates, the government has also announced that the tax rate for individuals with chargeable income exceeding RM1 million will increase from 28% to 30%.

This reflects a more progressive approach to taxation, with higher earners contributing more.

The overall effect will depend on each person’s circumstances. As PwC Malaysia noted in its Budget 2027 tax analysis, the higher tax rate may offset some of the savings for taxpayers at the very top end.

For most of us, the practical step is to understand which measures apply to our own situation instead of assuming that every announcement affects everyone equally.

What should we do with the extra money?

My suggestion is simple. Do whatever you like. Haha. This is kopiandproperty.com lah. Let’s do something purposeful which can help with personal finance.

First, understand the tax reliefs you may qualify for and keep the necessary supporting documents. Do not leave tax planning until the last minute.

Second, if the changes reduce your tax bill, consider where that extra money should go. You could strengthen your emergency fund, reduce expensive debt, save for your children’s education or invest according to your financial goals.

It is tempting to treat every tax saving as extra spending money. But if we use at least part of it to strengthen our finances, the benefit could last much longer than one year.

Budget 2027 may not solve every financial challenge faced by Malaysian households. Housing, childcare, healthcare and daily necessities remain significant expenses.

Nevertheless, higher personal tax relief, lower rates for selected income bands and expanded eligible expenses are welcome steps.

A little more money kept in our pockets may not change our lives overnight, but using it wisely can make a difference over time.

Happy planning!

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Sources

1. The Star — Budget 2027: Good news for M40, tax relief increased to RM12,000
2. Ministry of Finance Malaysia — The Fifth MADANI Budget 2027 speech
3. PwC Malaysia — Tax in Motion: Budget 2027 Edition
4. Bernama — Budget 2027 tax measures to benefit M40