Good news for South African taxpayers
The revised 2025 Budget, tabled by Finance Minister Enoch Godongwana on Wednesday, 12 March, is good news for South African taxpayers.
This is because the initial 2025 Budget, which was set to be tabled on 19 February, would have cost taxpayers even more than the newly unveiled version.
The initial 2025 Budget proposed a two percentage points increase in value-added tax (VAT) from 15% to 17%.
This would have significantly increased the price of most products in South Africa, impacting all population sectors.
The initial budget also proposed increasing personal income tax brackets, which was positive for taxpayers.
Adjusting the personal income tax bracket to higher levels puts tax relief on individuals, as the individual needs to earn a higher salary to fall within a higher tax bracket.
However, this initial budget was not accepted because many cabinet members opposed the significant increase in VAT.
These cabinet members wanted the government to cut spending instead of taxing citizens more, which would benefit economic growth.
Godongwana unveiled his revised budget, which included a 0.5 percentage point increase in VAT for 2025/26 and a further 0.5 percentage point increase for 2026/27.
This means that VAT will increase to 15.5% in 2025 and 16.0% in 2026. Despite the compromise on Godongwana’s side, many parties vowed to fight this increase.
The revised 2025 Budget removed the planned adjustments to the income tax brackets due to the lower VAT increase.
This means that the personal income tax brackets will remain unchanged relative to 2024/25, which will hurt taxpayers’ pockets.
Known as bracket creep, the state will take more money from salary earners who have received increases to keep up with inflation over the last year.
The tables below show the difference in tax brackets from the initial 2025 Budget to the revised version tabled on 12 March.
Initial Proposed Changes to The Income Tax Brackets
| Taxable Income (R) | Rate of Tax |
| 1 – 248600 | 18% of taxable income |
| 248601 – 388400 | 44748 + 26% of taxable income above 248600 |
| 388401 – 529200 | 81096 + 31% of taxable income above 388400 |
| 529201 – 694500 | 124744 + 36% of taxable income above 529200 |
| 694501 – 885400 | 184252 + 39% of taxable income above 694500 |
| 885401 – 1875 100 | 258703 + 41% of taxable income above 885400 |
| 1875 101 and above | 664480 + 45% of taxable income above 1875100 |
Unchanged Tax Brackets
| Taxable Income (R) | Rate of Tax |
| 1 – 237100 | 18% of taxable income |
| 237101 – 370500 | 42678 + 26% of taxable income above 237100 |
| 370501 – 512800 | 77362 + 31% of taxable income above 370500 |
| 512801 – 673000 | 121475 + 36% of taxable income above 512800 |
| 673001 – 857900 | 179147 + 39% of taxable income above 673000 |
| 857901 – 1817000 | 251258 + 41% of taxable income above 857900 |
| 1817001 and above | 644489 + 45% of taxable income above 1817000 |
The new budget is better for taxpayers
BusinessTech analysed the combined tax impact on an individual with the initial proposed and revised tax changes.
The initial tax changes included a 17% VAT rate, which added to the consumer’s tax burden, and increasing the income tax bracket, creating some relief.
The revised tax changes include a 15.5% VAT rate, which increases the consumer tax burden. Unchanged tax brackets also added pressure on income taxpayers.
For this analysis, BusinessTech assumed that taxpayers spent all their monthly earnings and would pay VAT on that amount.
Although this sounds strange, this assumption is backed up by research regarding South Africans’ spending habits.
A study conducted by STANLIB found that from 2000 to 2019, the average household savings ratio in South Africa was -0.5 %.
This means that, on average, households in South Africa save none of their income, spending 0.5% more than what they earn.
BusinessTech compared the total tax paid, including personal income tax and VAT, between the two budgets.
The comparison showed that the revised budget will have a smaller tax impact on all individuals than the initial budget.
The fact that people in South Africa save so little of their income causes the VAT impact to be significantly greater than that of tax bracket changes.
The chart below illustrates the difference between the initial 2025 Budget and the revised version on South African taxpayers based on different tax brackets.
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