Financial blows take effect on January 1, ushering in an expensive 2025 for Israelis
Tax hikes set to see paychecks shrink, while VAT, electricity, water and property tax rates are slated to rise
When the clock struck midnight in Israel on Tuesday night, the country ushered in not just 2025 but also a series of tax increases, price hikes and utility cost rises that will hit all Israelis’ pockets, as many households are already struggling to make ends meet.
Beginning January 1, the value-added tax in Israel rises from 17% to 18%. VAT is a consumption tax that is collected through the purchase of goods and services, and is levied on most consumer goods and services, except for fresh produce. The hike, which is expected to trickle down to consumers, will affect the prices of most transactions including groceries, cars and the cost of new apartments.
Israelis will also see their take-home pay shrink, with the sums deducted from paychecks toward the National Insurance Institute rising, with an additional NIS 1,000 to NIS 2,000 a year added to the amount already paid by the average household.
In addition, one day of annual recuperation payments will also be deducted from salaried employees, while income tax brackets and tax credit points will be frozen — meaning that they will not be adjusted higher in line with inflation.
In practice, taxpayers will be left with less disposable income while consumer prices will be increasing. Additionally, the surtax levied on the country’s wealthiest — those earning over NIS 721,560 annually — will be raised from the current 3% to 5%.
These measures were all approved by the Knesset to bolster state income and fill a fiscal gap amid high defense expenses almost 15 months into a grueling war.

But they’re not the only financial hits Israelis will take beginning on January 1.
The price of electricity is set to climb by 3.5 percent, while water prices are expected to rise by 2%, another increase that is slated to most harm the lowest socioeconomic levels in Israel.
While tax property rates — known in Israel as arnona, are set by each individual municipality, they are able to be raised by 5.2% this year, with most cities expected to do so. And some municipalities, including Jerusalem, are also adding a steeper hike specifically for buildings that have been constructed since January 2020.
On top of that, a number of companies have announced price hikes on their products entering into effect on January 1, including a number of products from food giants Osem-Nestle, Strauss-Elite and Unilever.