Tax hikes and Eskom cuts: Inside the ‘cancelled’ 2025 Budget
South Africa’s 2025 Budget may have been postponed, but leaked documents reveal the state’s plans for a plethora of proposed tax and other spending changes.
In an unprecedented move, the 2025 National Budget was cancelled minutes after it was supposed to be tabled.
Notice of the cancellation came after the Government of National Unity (GNU) members could not agree on the proposed tax changes, particularly the increase in value-added tax (VAT) from 15% to 17%.
Finance Minister Enoch Godongwana announced that the National Budget will now be presented on 12 March 2025.
Following the cancellation, documents related to the 2025 Budget from National Treasury and SARS found their way online, pointing to a series of changes—which may now be up in the air.
The documents confirmed the increase in VAT to 17%, which was widely unexpected by experts in the build-up to the speech.
This was accompanied by proposals to expand the zero-rated list to protect the poor from the hike.
The zero-rated list currently includes many items excluded from VAT, including 19 food items, residential rental accommodation, items under the nation’s fuel levies and more.
Under the delayed proposals, the list would be expanded to include edible offal, unflavoured dairy liquid blends and specific canned and bottled vegetables.
SARS said that this move would assist poor households, who are disproportionately affected by increases in VAT.
These are some of the biggest changes contained in the budget.
Note: National Treasury has acknowledged that the budget documents have been made available to journalists and economists. It must be stressed that until the final documents are tabled on March 12, all proposals and information contained in the documents are subject to change.
Income Tax
Part of the planned announcements included a change in South Africa’s income tax brackets.
The first two brackets are fully adjusted for the effect of inflation, while the other brackets are partially adjusted.
This would have provided relief to lower-income earners, and partial relief to higher-income earners in 2025.
The changes in tax rates can be found below:
| 2024/25 Rate of Tax | 2024/25 Taxable Income | 2025/26 Rate of Tax | 2025/26 Taxable Income |
| 18% of taxable income | R0 – R237,100 | 18% of taxable income | R0 – R248,600 |
| R42,678 + 26% of the amount above R237,100 | R237,101 – R370,500 | R44 748 + 26% of taxable income above R248 600 | R248,601 – R388,400 |
| R77,362 + 31% of the amount above R370,500 | R370,501 – R512,800 | R81 096 + 31% of taxable income above R388 400 | R388,401 – R529,200 |
| R121,475 + 36% of the amount above R512,800 | R512,801 – R673,000 | R124 744 + 36% of taxable income above R529 200 | R529,201 – R694,500 |
| R179,147 + 39% of the amount above R673,000 | R673,001 – R857,900 | R184 252 + 39% of taxable income above R694 500 | R694,501 – R885,400 |
| R251,258 + 41% of the amount above R857,900 | R857,901 – R1,817,000 | R184 252 + 39% of taxable income above R694 500 | R885,401 – R1,875,100 |
| R644,489 + 45% of the amount above R1,817,000 | R1,817,001+ | R664 480 + 45% of taxable income above R1 875 100 | R1,875,101+ |
Sin Taxes
The government had plans to hike the excise duty on sin taxes above inflation. Duties on alcohol and tobacco would have been hiked by 6.83%.
Sin taxes are often seen as a simple way for the National Treasury to increase revenues. The justification for the increases is often linked to the damage that these goods cause.
Fuel Levy
Godongwana would have also announced fuel levy relief for another year, saving consumers around R4 billion.
This would have been the third consecutive year of no hikes to these taxes, with Treasury freezing the levies since April 2022.
Eskom
Beyond taxes, Godongwana mentioned in the speech that the Eskom debt relief arrangements are starting to bear fruit.
With Eskom in a better position compared to when the R254 billion debt relief was originally announced in 2023, the National Treasury would have announced a simplified final phase of the relief package.
The final R70 billion debt takeover would have been replaced with a R40 billion switch in 2025/26 and R10 billion in 2028/29, resulting in a total saving of R24 billion.
Grants
The Budget also held good news for social grant recipients.
It would have seen an additional R23.3 billion allocated to social grants, designed to ensure that low-income households were not worse off by the increase in the VAT rate.
The old age and disability grant would have been increased by R150 to R2 340 in 2025, which would be split between a R140 increase in April and a R10 increase in October.
The Child Support Grant would have also been increased by R50, or 9.4%, to R580 per month, and the foster care grant would have jumped by R80.
The Covid-19 Social Relief of Distress (SRD) grant would have also been extended by a year to end March 2026. R35.2 billion was allocated for this purpose.
Godongwana’s speech also specifically mentioned that the SRD grant would be used to introduce a sustainable form of income support for unemployed people.
This is a long-held position mentioned in previous speeches, including president Cyril Ramaphosa’s State of the Nation Address.
Older government employee payoff
The cancelled budget speech also revealed the government’s R11 billion plan to promote and attract younger workers to the public sector.
This would have been budgeted over the next two fiscal years for an early retirement initiative for state workers.
Preliminary savings were estimated to average R7.8 billion per year over the medium to long term, and savings would have been retained by departments.
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