Tax changes 2025/2026: What expats from the US and the UK should know in Germany

Anyone moving from the United States or the United Kingdom to Germany — or who is already subject to unlimited taxation in Germany — will quickly notice that even small legislative changes can have a significant cumulative impact, particularly on employment income (including remote work) and retirement planning. The following planned or implemented changes may be relevant for expatriates.

Retirement Savings Reform Act (Altersvorsorgereformgesetz)

The Retirement Savings Reform Act is designed as a simplification reform of state-subsidised private retirement savings. The focus is on a more easy-to-understand incentive model (including the structure of allowances/subsidies), less bureaucracy, and adjustments relating to the home-ownership pension (Eigenheimrente). For expats, this is particularly relevant if they plan to build up subsidised private retirement savings in Germany for the first time, or if they intend to continue existing contracts from an earlier employment period in Germany and potentially transfer them into a different incentive scheme.

Active Retirement Act (Aktivrentengesetz)

Under the enacted Active Retirement Act, social-security liable employment income earned after reaching the statutory retirement age is intended to remain tax-free up to EUR 2,000 per month. This may become relevant for international professionals who continue working after retirement age (e.g. project extensions, part-time employment, or advisory work as an employee).

Tax Amendment Act 2025 (Steueränderungsgesetz 2025)

Also enacted is the Tax Amendment Act 2025, which contains practical rules that expats often feel directly. The remote-work allowance (Homeoffice-Pauschale) is to be made permanent, and the commuting allowance (Entfernungspauschale) is being adjusted. For many arrivals from the US and the UK — often characterised by hybrid working arrangements and changing workplaces—these rules can be particularly relevant in German income tax returns because they regularly have a noticeable impact on deductible employment-related expenses (Werbungskosten).

Second Occupational Pension Strengthening Act (Zweites Betriebsrentenstärkungsgesetz)

Finally, the Second Occupational Pension Strengthening Act strengthens voluntary occupational pension schemes (betriebliche Altersversorgung, bAV), including improvements to the bAV support amount (bAV-Förderbetrag). This applies in particular to lower income levels, dynamic thresholds, and higher maximum support amounts. For expats, this is especially relevant when changing employers or entering the German labour market. Often, a bAV arrangement is the most efficient entry point into a German retirement savings structure—even if US/UK pension plans continue to exist alongside it.

Conclusion

Expats living in Germany should not view these changes in isolation. What matters is how the working model, retirement planning and life stage interact. This is where the greatest planning opportunities typically lie in practice—but also where the most frequent risks arise from “unexpected” tax consequences.

Author: Peter Scheller, Tax Adviser, Master of International Taxation, Specialist Adviser for Customs and Excise Duties

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