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Date Published: 02/01/2025

The only way is up for Spanish prices in 2025

Electricity, rent and food prices will all increase in Spain this year

As the curtain falls on a rollercoaster 2024, the stage is set for 2025 - and it’s bringing a fresh wave of price hikes, tax adjustments and income changes. From electricity bills to housing costs, food and taxes, many items on our expense lists are heading upward. The good news? Mortgages and some corporate taxes are poised for relief.

Higher household costs

The most striking increase is the electricity bill, with VAT returning to its pre-crisis level of 21%. After three years of reduced rates, households can expect a rise of around 13%, or more than 100 euros annually, according to OCU estimates.

On the housing front, both buying and renting are set to become even pricier, adding more stress to an already strained market. Analysts predict rising home prices, fuelled by anticipated ECB interest rate cuts, while a continued shortage of rental properties in major cities will further inflate rent costs.

For grocery shoppers, food prices will see a very unwelcome VAT reset. Basic items like olive oil will return to a 4% rate, while pasta and seed oils will jump to 10%. However, the overall impact is expected to be manageable due to declining food prices, including a rapid drop in olive oil costs.

Telecommunications costs are also rising. Major providers like Movistar, MasOrange and Vodafone plan price increases ranging from 10 cents to 6 euros monthly, while postage stamps will climb by 8.5% and toll roads by 2%.

Sticking with tolls, and there’s still no decision on whether we’ll be paying to use other high-capacity roads like dual-carriageways this year. Although Brussels has demanded that Spain implement some sort of pay-per-use system within the next couple of months, the Ministry of Transport is standing firm, insisting that this is not on the agenda. So we’ll have to wait and see.

Finally, a new waste tax for municipalities with more than 5,000 residents could cost households 165 euros – 200 euros annually, adding to the growing list of expenses.

Taxes and contributions

In 2025, Social Security contributions for the self-employed will tick slightly upward, with the intergenerational equity mechanism rising to 0.8%.

High earners will also see a new solidarity quota for salaries exceeding 58,908 euros annually, while the personal income tax on capital gains above 300,000 euros will increase from 28% to 30%.

There’s also the possibility of a diesel tax hike. If approved, it would add 11 cents per litre, aligning diesel prices more closely with petrol. Additionally, vapes, electronic cigarettes and tobacco products will face new taxes starting in April.

On a brighter note, corporate tax for SMEs will drop from 25% to 20%, offering some financial relief to small and medium-sized enterprises.

Pensions and wages to rise

Amidst the cost increases, there’s some good news for pensioners and employees.

Contributory pensions will grow by 2.8%, with even larger boosts for minimum pensions (6%) and non-contributory benefits (9%).

The minimum wage is also set to rise by at least 3%, as confirmed by Second Vice President Yolanda Díaz. Broader wage growth across industries is expected to outpace inflation, giving workers a slight financial edge.

What’s remaining stable?

For public transport users, there’s good news: prices will remain frozen in many regions due to extended government-approved discounts. Regions like Madrid, Catalonia Valencia, and Andalucía have committed to maintaining reduced fares at least through mid-year.

While 2025 is set to bring a slew of price hikes across essential goods and services, strategic ECB policies could offer mortgage relief and economic stability for many. With wages and pensions on the rise, many people living in Spain may find some balance amidst the challenges.

In other news: Spain holiday calendar 2025: These are all the festivos, bank holidays and long weekends

Image: Pixabay

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