Flat-rate tax 2026: bands, conditions and when it pays off

What flat-rate tax is and whose worries it saves

Imagine that instead of a tax return, a statement for the social security administration and another statement for the health insurance company, you send one amount once a month and you are done. That is exactly what flat-rate tax is about.

It is a voluntary regime for self-employed people (OSVČ) in which one monthly payment covers three things at once: income tax, social (pension) insurance and public health insurance. If you meet the conditions and stay within the limits for the whole year, you file no tax return and no statements. No April spent with a calculator over bank statements. No arguing with your accountant about what still counts as an expense.

It sounds attractive. But it is not advantageous for everyone, and the rest of the article explains how to identify your case.

Three bands and monthly amounts for 2026

Since 2023, flat-rate tax has had three bands. Which one you fall into depends on annual income and on the lump-sum expense allowance that would apply to your activity.

Warning - a change is being prepared for band 1: For 2026, the first band is stated as 9,984 Kč per month. An amendment is under discussion under which the band 1 amount should be reduced by roughly more than 800 Kč per month during 2026, with already paid overpayments returned to self-employed people. Before deciding or setting a standing order, verify the current amount with the Tax Administration. Bands 2 and 3 are unchanged from 2025.

What is inside the one payment? In band 1, most of it goes to insurance and only a symbolic 100 Kč to income tax itself. You do not deal with the split; the state divides the money itself.

Which band do I belong to?

This is the most common stumbling block. The band is not determined only by income, but also by the type of activity, specifically by which lump-sum expense allowance you would be entitled to (80 %, 60 %, 40 % or 30 %). Craftspeople and farmers have 80 %, while ordinary unrestricted and regulated trades have 60 %.

Rules for band 1:

• income up to 1,000,000 Kč for any activity, or
• income up to 1,500,000 Kč if at least 75 % of income falls under the 80% or 60% allowance, or
• income up to 2,000,000 Kč if at least 75 % of income falls under the 80% allowance.

For band 2:

• income up to 1,500,000 Kč for any activity, or
• income up to 2,000,000 Kč if at least 75 % of income falls under the 80% or 60% allowance.

Band 3 covers self-employed people with income up to 2,000,000 Kč from any activity who do not meet the conditions for a lower band.

Say you operate a craft trade, such as mason, hairdresser or car mechanic, and invoice 1.3 million per year. You are entitled to an 80% allowance, so even with this income you fit into band 1. By contrast, an IT consultant with an unrestricted trade and the same turnover falls higher.

Entry conditions: who can use the regime

Not everyone can enter the flat-rate regime. You must meet all of these conditions at the same time:

1. You are not a VAT payer and do not have a duty to register for VAT, which relates to the 2 mil. Kč limit.
2. Your annual income from independent activity did not exceed 2,000,000 Kč in the previous year.
3. You have no employment income (dependent activity), except income taxed by withholding tax.
4. You are not a partner in a public commercial company or a general partner in a limited partnership and are not insolvent.

Point 3 troubles people most often. If you have employment under a standard contract alongside your business, you cannot use flat-rate tax. The regime is built for "pure" self-employed people.

Watch the turnover limit. The 2,000,000 Kč threshold is shared by flat-rate tax and compulsory VAT registration. As soon as you exceed it during the year, you drop out of the flat-rate regime and file a standard tax return and statements for that year. Monitor your turnover continuously — ideally keep simple records of income so the end of the year does not surprise you.

How and by when to register

Entry into the flat-rate regime is notified to the tax office on the form Oznámení o vstupu do paušálního režimu. It can be filed on paper or electronically through the MOJE daně portal.

• For 2026, the final deadline was Monday 12 January 2026. The statutory deadline is 10 January, but this year it fell on a Saturday, so it moved to the nearest working day.
• Any change of band for the coming year is also notified by the same deadline.

Tip: Mark the deadline for future years right at the beginning of January. It cannot be extended - if you miss it, you cannot enter the regime for that year and must wait until the following year. If, on the other hand, you are already in the regime and want to continue, you do not have to do anything; the registration remains valid.

After registration, you pay the advance monthly by the 20th day of the relevant month to the tax office's account. The most convenient option is to set up a standing order - just remember the possible change in the band 1 amount during 2026 discussed above.

Advantages: why people do it

• One payment, one deadline. No arguing over how much you owe in tax and how much in insurance. You send a fixed amount and it is handled.
• No tax return or statements. The administration around the return, the statement for OSSZ and the statement for the health insurance company disappears. Often the accountant's costs disappear too.
• Predictability. You know in advance how much you will pay to the state for the year. That is invaluable for budget planning.
• Peace from checks over claimed expenses. You do not deal with what you may still put into costs and what you may not.

Disadvantages: where it can hurt

Flat-rate tax is not a win for everyone. The main catch?

• No credits or deductions can be claimed. The taxpayer credit is already reflected in the amount, but you cannot use the credit for a non-working spouse, child tax relief, deduction of mortgage interest or contributions to pension savings in the flat-rate regime. For a family with one income and two children, this can mean losing tens of thousands of crowns a year.
• You pay even in a loss-making or weak year. The monthly amount is fixed. If you have a lean year or even a loss, in the standard regime you would pay nothing in tax - here you keep paying the same amount.
• Unfavourable with high actual expenses. If you have a lot of real costs, a standard return with actual expenses may work out better for you.
• Insurance may not "count" towards your pension the way you expect. In band 1 you pay insurance from the minimum, so the assessment base for your future pension is low.

Who flat-rate tax suits

A simplified guide - the flat-rate regime most often makes sense if:

• you have stable income up to roughly 1 million Kč and entitlement to an 80% or 60% lump-sum expense allowance,
• your actual expenses are low (typically services where you do not sell goods and do not have large purchases),
• you do not claim any large credits - you have no children, your partner works, you have no mortgage,
• you want peace from paperwork and a predictable payment.

On the other hand, think it through if you support a family on one income, have high real costs, are repaying a mortgage or expect a loss-making start to the business. In these cases, a standard return with credits and actual expenses is usually more favourable.

Say you want to sell handmade candles through an e-shop, and you buy wax, wicks and packaging for hundreds of thousands a year. High actual expenses will probably point you more towards a standard return than the flat-rate regime. By contrast, a graphic designer who invoices 700 thousand a year, works from home and has almost no costs, is made for the flat-rate regime.

Before you decide, calculate both scenarios - flat-rate tax versus a standard return with a lump-sum expense allowance and credits. The difference can easily be tens of thousands of crowns a year. In more complicated situations, a short consultation with a tax adviser is worthwhile; a one-off fee can pay for itself many times over.

Information reflects the legal position for 2026 (Act No. 586/1992 Coll., on Income Taxes). This text is informative and does not replace individual tax advice. Amounts marked [OVĚŘIT] relate to legislation under discussion - before deciding, verify the current flat-rate tax amount with the Tax Administration.