What is the difference between A and B income
When and where are the different tax cards used
In the newsletter we look at the difference between A and B income and when the different tax cards are used. We sometimes receive questions about when it is A-income and when it is B-income - therefore a description of the difference and when A-income is used and when B-income is used.
What is the difference between A and B income:
Briefly, the difference between A and B income is A-income is the salary etc. the employer pays out to the permanent employees, typically monthly or every 14 days. In the case of A-income, it is the employer's duty to ensure that primary tax, 8% contribution and ATP as well if any pension are withheld and reported before payment of the net amount.
B-income is typically a one-off payment in the form of a one-off fee to a freelancer/lecturer etc. who has delivered a personal piece of work or service without being in a regular employment relationship. It is a payment for a limited task and the employer does not have to withhold tax, 8% contribution, ATP and pension etc. The agreed amount is paid gross.
The employer is, however, obliged to report the amount to SKAT on the person's social security number (cpr-number) as B income. After this, the person must arrange for the settlement of B-tax etc.
A and B income has one thing in common, and that is the tax must be paid. The difference between A and B income is, that A-income is the employer obligated to withheld and pay for tax etc., and for B-income it is a private matter.
When and where are the different tax cards used:
Primary tax card is used for the primary income as at a job or the state education grant (SU).
The primary tax card states the withholding rate and the monthly tax-free deductions and allowances. When employer pays out salary, tax is only withheld on the amount exceeding the monthly tax-free deductions and allowances.
The secondary tax card only states withholding rate. When the employer pays out salary the tax is withheld on the entire amount.
The secondary tax card is only used if the employee has more than one employer or provider – e.g., if the employee has a job and receive the state education grant (SU) at the same time.
Tax exemption card is used if the income is small (In 2023 max. earn DKK 48,000 for people with an age over 18. For young people under 18, the tax-free amount is DKK 38,400).
However, 8% contribution must be paid of the entire salary – even if you use an exemption card.
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