How much tax you’re really paying in 2025

·17 Mar 2025

South African taxpayers are in for a double blow in 2025 as bracket creep and Finance Minister Enoch Godongwana’s new VAT hike are set to eat away at salaries in April and May.

Crunching the numbers in the proposed 2025 Budget, independent data analyst Pieter Jordaan shows that lower-income earners are set to bear the brunt of the coming hikes.

However, wealthy South Africans will also be hit hard. Top earners will see over 43% of their salaries go to the state.

Godongwana announced the tax measures as part of a new 2025 Budget. He rescinded a potential two-percentage-point VAT hike in his original February budget and replaced it with a 0.5 ppt hike in March.

This came with the trade-off that tax brackets would not be adjusted for 2025, marking the third year of bracket freeze.

Not adjusting tax brackets for inflation is a form of stealth tax on South African workers known as bracket creep.

This is where workers who get inflation-based or above-inflation salary increases are pushed into a higher tax bracket and pay more tax. For 2025, Godongwana hopes to raise R18 billion this way.

According to Jordaan, South Africa’s bracket creep has been profound over the past three years.

In 2023, the tax threshold—the point at which salary earners must start paying tax—was raised to R96,000 per year.

Adjusted for inflation, using 2015 as the base year, this threshold should be R119,000 in 2025. Instead, it is stuck at R96,000, already below inflation in 2023.

This will result in all salaried workers paying between 7% and 38% more tax in 2025 versus 2015, with lower earners hit the hardest.

Those earning R15,000 a month would have seen their effective personal tax rate climb from 6.1% in 2015 to 8.4% in 2025.

Top earners pulling in over R120,000 a month would have seen their effective personal income tax rates climb from 30.6% in 2025 to 32.8% in 2025.

VAT hike eats away at income

According to Jordaan, the picture shifts significantly when the VAT hike is factored in, with the lower-end earners once again hit the hardest.

However, while the direct impact of bracket creep on taxes is between 7% and 38% when VAT is included, the effective tax rate jump from 2015 to 2025 is lower, at 7% and 17%.

The VAT hike is counterproductive, eating away at disposable income and making income tax less effective.

This, in turn, necessitates more taxes, so the government starts a spiral similar to those seen at state-owned companies like Eskom.

“As more disposable income is removed from the economy—and thus less private sector activity—it adds fiscal drag,” Jordaan said.

“There is also an inverse correlation between personal income tax and VAT: bracket creep removes disposable income, reducing VAT efficiency, needing a VAT hike to restore the revenue levels.”

National Treasury has tried to mitigate some of the impact of the VAT hike by increasing the number of zero-rated items in the national food basket and by also freezing fuel levies for another year.

Combined, this is expected to deliver tax ‘relief’ of around R6 billion.

According to Jordaan, despite the VAT hike likely being less effective than anticipated, combined with bracket creep, taxpayers are going to feel the pinch.

Personal income tax and VAT

Those earning R15,000 a month will see their effective tax rate shoot up to 22.6% from 19.2% in 2015, while top earners will see their burden rise from 40.3% to 43.2%.

These only factor in income tax and VAT—not the myriad of other taxes that will also eat away at monthly earnings, many of which are already significant taxes on the wealthy.

South Africa’s tax burden is now the highest it has been in 20 years, as shown in the tables and graphs below.