The new budget includes defense boosts, small tax cuts, increased tax-free allowances, and minor VAT reductions. Here’s an overview of 10 things from the budget that might impact you or your wallet, or that you might have missed.
On the morning of 7 October, the Norwegian government revealed the full details of the proposed national budget for 2025. Scrutiny of this budget is higher than usual as there will be a national election next year.
First of all, the minority AP-SP government said it plans to raise spending from the sovereign wealth fund to pay for public expenses. The proposed withdrawal of NOK 460.1 billion will need to be negotiated with SV in order for the budget to pass.
The Ministry of Finance revised its forecast for non-oil GDP growth to 0.7% for this year, down from the 0.9% predicted in May. Growth is expected to rise to 2.3% in 2025 and 2.1% in 2026.
Also, the government noted that the economic outlook includes stronger growth prospects and sustained low unemployment. Core inflation is projected at 3.2% for 2025, dropping to 2.7% in 2026.
“Unemployment is still low, wages are increasing faster than prices and businesses are thriving. After several years of economic unrest, we are experiencing an economic turning point where people are financially better off,” said the government press release.
1. Small Tax Cuts for “Ordinary People”
Everyone earning over NOK 1 million will have to pay more taxes, but most Norwegians with income below this threshold will get a small tax cut. The tax-free income threshold will be increased from NOK 70,000 to NOK 100,000.
Workers who make a significant commute by car are also set to benefit from an improvement in the commuter deduction program. Under the proposed change, the minimum deduction will be NOK 15,250 and the maximum will be NOK 100,880.
There's also a further rise in the maximum tax deduction allowed for trade union memberships to NOK 8,250 per year.
There is a cut in air passenger tax for travel in Norway and Europe from NOK 80 to NOK 65 per ticket. However, the high rate that applies for long-haul journeys outside of Europe will increase to NOK 342 kroner per ticket.
If you're curious about how taxation works here, you're not alone. Check out our introduction to Norwegian tax to get you started.
2. Changes to Tobacco and Alcohol Taxes
Taxes on snus, cigarettes, and alcohol will increase more or less in line with inflation next year.
The tobacco tax for snus will increase by 3.1%. This means the tax for 100 grams of snus will rise to NOK 100.01.
The tax on cigarettes and alcoholic beverages between 4.7% and 22% will increase by 2.9%. That means the tax on cigarettes will increase to NOK 324 per 100 grams.
3. A Boost To Defense
Norwegian Defense Chief Eirik Kristoffersen secured a 21% increase in defense spending for 2025, with NOK 110.1 billion allocated. This boost aims to surpass NATO's target of spending 2% of GNP on defense.
Despite the increase, Kristoffersen emphasised the need for cost control, structural reforms, and ongoing support for Ukraine. Concerns include underestimating operational costs, maintaining defense personnel, and dealing with high recruitment demand.
Kristoffersen is also focused on strengthening Norway’s defense in the north and integrating military operations with NATO allies, particularly Sweden and Finland.
4. Better Power Subsidies
Currently, the electricity subsidy kicks in when the price of electricity exceeds 73 øre (NOK 0.73) per kilowatt hour. This threshold will be raised to 75 øre (NOK 0.75).
The subsidy will cover 90% of the price above this level. Since the subsidy is applied hourly, it will also dampen price spikes on days with otherwise low prices. Learn more about electricity bills with our guide to paying for power in Norway.
5. Cheaper Childcare
From August, 2024, Norwegian barnehager (kindergartens) became cheaper, and after-school care (SFO) is now free for 12 hours a week for third-grade students.
The maximum price for kindergarten was reduced from NOK 3,000 to NOK 2,000 per month. For a family with two children in kindergarten, this means a saving of NOK 22,000 a year before tax.
In the 189 most sparsely populated municipalities, the maximum price was set at 1,500 NOK per month.
At the same time, stricter rules for cash-for-care benefits came into effect on August 1. Previously, you received support when the child was between 13 to 23 months old. In August, this was changed to between 13 and 19 months.
6. Tighter Asylum Policy
The government plans to accept just 200 quota refugees next year, a sharp decrease from the 3,000 Norway committed to in 2022.
The reduction is attributed to the high number of asylum seekers granted residency under collective protection rules. To date, 82,500 individuals from Ukraine have received protection in Norway.
7. Helping People Get Jobs
For those unemployed or otherwise outside the workforce, the government is increasing efforts to help more people find jobs. NOK 690 million is allocated for general labour market initiatives, a new youth program, and job opportunities for immigrant women.
8. Increasing Disability Pensions
Expenses for old-age pensions, work assessment allowances, disability benefits, sickness benefits, and unemployment benefits are increasing. The government will increase pensions for around 150,000 disabled pensioners.
The government proposes giving a shielding supplement to the old-age pension for those born between 1954 and 1962, similar to what was given to those born before 1953. This will cost NOK 393 million.
9. Savings Changes for Students and Youth
Students living in remote areas may have NOK 25,000 of their student loan written off annually. To qualify, they must live in a remote municipality for at least one year and be employed.
For residents of Finnmark and Nord-Troms, where the scheme is already active, the write-off rate will be doubled to NOK 60,000 per year.
Student support will increase by 2.9%, which is slightly less than expected inflation. The government also proposes allowing universities and colleges to charge a fee if students choose to retake exams they have already passed.
The BSU (housing savings for young people) scheme remains unchanged. This means that those under 34 can still save NOK 27,500 per year, to a total of NOK 300,000, towards a housing deposit. In addition to favourable interest rates, saving in BSU also provides a 10% tax deduction.
10. VAT Cut for Water and Sewage
Fees related to water and sewage have increased recently, affecting all homeowners. In Oslo, prices are expected to rise by more than 60% by 2027. The government plans to reduce VAT (MVA) on water and sewage from 25% to 15%, so access to water and sewage services will become somewhat less expensive.
This isn't a comprehensive list of everything in the budget, rather some highlights that I thought would be interesting for the Life in Norway audience.
Furthermore, please remember that this budget is just a proposal. It will need to be debated and approved in parliament.
Given the present government does not have a majority in parliament, there are almost certainly going to be changes to the final budget.
