Budget 2027 gives middle-income taxpayers a second piece of good news. Alongside the higher individual relief of RM12,000, the government is cutting personal income tax rates for two chargeable income brackets.
What changed
Resident individual tax rates fall by one percentage point in these bands:
| Chargeable income | Current rate | New rate |
|---|---|---|
| RM70,001 to RM100,000 | 19% | 18% |
| RM100,001 to RM150,000 | 25% | 24% |
The cuts apply from the 2027 year of assessment, which means income earned in 2027 and reported when you file in 2028. They cover only the bands above. Rates for other income levels are not part of this adjustment.
Understanding marginal rates
A common mistake is to assume the new rate applies to all your income. Malaysia uses a progressive system, so each rate applies only to the slice of chargeable income that falls within its band.
Say your chargeable income is RM120,000. The first RM70,000 is taxed at the existing rates. The next RM30,000 (RM70,001 to RM100,000) is taxed at 18%. The final RM20,000 (RM100,001 to RM120,000) is taxed at 24%. Only the slices in the affected bands are cheaper, and the saving comes from the one percentage point difference on those slices.
How much could you save?
Here is an illustration based on simple arithmetic. It is not an official figure.
- Someone with chargeable income of RM100,000 saves 1% on RM30,000, or about RM300 a year from the rate cut.
- Someone with chargeable income of RM150,000 or more saves 1% on RM30,000 plus 1% on RM50,000, or about RM800 a year from the rate cut.
Remember that chargeable income is what remains after your reliefs. The RM3,000 increase in basic relief lowers your chargeable income further, so the two measures work together. The government estimates that, combined, they give up to RM1,600 in extra disposable income to about five million taxpayers.
Who benefits most?
The change is aimed at the middle-income group, or M40, who have felt the squeeze of rising living costs. If your chargeable income falls in the RM70,001 to RM150,000 range, you benefit directly. If your income is below that range, the higher relief still helps, but the rate cut will not apply to you.
Keep the bigger picture in view
Budget 2027 also introduces a 30% rate for income above RM1 million, instead of above RM2 million. This makes the overall system more progressive. If your income is growing, or you have income from several sources, your position may look different from what the headline rates suggest.
What to do now
- Estimate your chargeable income for 2027. Knowing which band you fall in tells you how much of the cut applies to you.
- Maximise your reliefs. Every ringgit of relief you can legitimately claim reduces income taxed at your highest rate.
- Keep proper records. Budget 2027 widens several relief categories, so organised receipts matter.
- Watch for the final legislation. Details are confirmed through the Finance Bill and LHDN guidelines.
Speak to AdrianYeo Tax
Tax planning works best when it starts before the year ends, not after. Our chartered accountants can help you see how Budget 2027 affects your own position and plan accordingly.
This article is for general information only and does not constitute tax advice. Measures are based on Budget 2027 announcements and may change when the legislation is finalised. Please consult a tax professional about your specific circumstances.
