Tax Planning
Addressing Ultra-High Income: Japan’s Tax Band Overhaul and How Top Earners Should Respond
Japan is lowering thresholds and raising taxes for ultra-high income; top earners need to plan ahead as rate jumps hit from FY2029.
By NomadicTax Research Team • 5-8 min read • August 20, 2026
## What’s the New Rule for Ultra-High Incomes
- Under the 令和8年度税制改正（FY2026 tax reform outline）Japan is changing the “極めて高い水準の所得に対する負担の適正化措置”:
* The **special deduction amount** (特別控除額) for calculating additional tax burden is lowered from **¥330 million (¥330,000,000)** to **¥165 million**. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_01.htm?utm_source=openai))
* The applicable rate is raised from **22.5%** to **30%**. This comes into effect starting with income tax for **令和9年分 (FY2029)**. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_01.htm?utm_source=openai))
## Who’s Affected and How Much More Tax Will Be Due
- The change expands the number of individuals subject to this top band—from roughly **200 people** to around **2,000** taxpayers. ([mof.go.jp](https://www.mof.go.jp/english/policy/tax_policy/tax_reform/08keyhighlight.pdf?utm_source=openai))
- It affects taxpayers with combined income from salaries, business, capital gains, etc., exceeding ¥165 million after standard deductions.
## Actionable Takeaways for High-Net-Worth Individuals
1. **Income Timing Strategies**: Consider accelerating deductions or deferring income where possible prior to FY2029, to avoid entering the new top rate.
2. **Investment Realization Decisions**: Gains on sale of securities, real estate, etc., should be timed with the threshold changes in mind.
3. **Evaluate structure of income sources**: Salary + dividends + capital gains all count toward the base; spread across years if feasible.
4. **Tax credits & deductions review**: Make sure to maximize remaining deductions and credits before the higher rate and narrower base apply. Focus on expense recognition, loss carry-forwards, etc.
## Example Scenario
Mr. A earns ¥100 million in salary, ¥30 million in capital gains, and ¥50 million in business income in FY2029-income year. His combined income base exceeds the new threshold of ¥165 million. Under new rules, he must compute his additional tax using 30% rate and with little deduction relative to prior rules—which means much higher marginal tax burden. Planning now can reduce exposure via income deferral or income splitting.
## Bottom Line
The coming reform signals that Japan is intensifying tax on its highest earners. For anyone nearing the threshold, now is the time to assess tax planning tools, adjust timing of earnings, and consider structuring income to mitigate the jump in tax burden. Effective tax advice tailored to each income stream and timing becomes essential.