How to legally pay less tax in South Africa

With South Africans expected to face higher taxes in 2025, a financial expert has stressed the importance of taking advantage of simple methods to minimise the amount of money they pay to SARS.

These include paying into retirement annuities, taking advantage of tax-free savings accounts, claiming back the medical aid tax credit, deductions from donations to Public Benefit Organisations and double-checking your employer is paying the correct PAYE.

After initially planning marginal adjustments to income tax brackets in the original budget in February, the National Treasury has opted for no adjustments in the revised budget.

This means that taxpayers will fall prey to inflationary bracket creep. Finance Minister Enoch Godongwana had to implement this trade-off to cover for a heavily reduced VAT hike in the country.

In addition to personal income tax brackets, rebates and medical tax credits also received no adjustments for inflation.

These measures will raise R28 billion in additional revenue in 2025/26 and R14.5 billion in 2026/27. The personal income tax proposals, effective 1 March 2025, are expected to raise R19.5 billion in revenue.

However, while bracket creep doesn’t seem significant, independent data analyst Pieter Jordaan showed how much more South Africans are actually paying 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 compared to 2015, with lower earners being 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.

Wealthier taxpayers earning over R120,000 a month would have seen their effective personal income tax rates climb from 30.6% in 2024 to 32.8% in 2025.

The picture gets even bleaker when comparing the effective tax rates over the last 10 years when the revised 1%pt increase in VAT over the next two years is included.

When factoring in VAT, Jordaan noted that the tax rate for those earning R15,000 increased to 22.6% from 19.2% in 2015, while the burden for top earners rose from 40.3% to 43.2%.

How to pay less tax

As South Africans brace for new tax pressures, there are several ways to legally reduce tax liability and make the most of available benefits. 

According to Momentum Financial Planning executive financial adviser JJ van Wyk, proactive planning is key. “A little preparation now means fewer surprises later and a more rewarding tax outcome,” he said.

One of the most effective ways to reduce taxable income is by maximising retirement savings. Contributing to a retirement annuity (RA) or pension fund not only secures your future but also provides significant tax deductions. 

“You can deduct contributions of up to 27.5% of your taxable income, capped at R350,000 annually, which reduces your taxable income and boosts your savings,” van Wyk explained.

He added that medical aid tax credits are another valuable tool for reducing tax liability. If you pay for medical aid, you may qualify for tax rebates under the Medical Schemes Fees Tax Credit. 

“SARS allows a fixed monthly rebate per member and dependant, lowering your overall tax burden,” said van Wyk.

“However, ensure you’re the one benefiting from the tax credit, as some employer contributions may already factor this in.”

Many taxpayers also overlook eligible deductions that can lead to significant tax savings. Van Wyk highlights donations to Public Benefit Organisations (PBOs) as a prime example. 

“You can donate up to 10% of your taxable income and claim a deduction, provided the charity has a valid Section 18A certificate,” he added. 

Other deductions include home office expenses (if applicable) and qualifying travel costs, which, if properly documented, can further reduce taxable income.

Van Wyk advised employees paying tax through the Pay-As-You-Earn (PAYE) system to ensure their employer deducted the correct amount throughout the year. 

“This ensures you’re not overpaying or underpaying tax, which could lead to unexpected liabilities,” said van Wyk. Reviewing PAYE calculations regularly helps avoid costly surprises when filing tax returns.

Investment tax efficiency is another crucial aspect to consider. Interest income, dividends, and capital gains are all subject to tax, so ensuring your investments align with tax-efficient strategies can enhance returns. 

“Tax-free savings accounts offer an excellent way to achieve tax-free growth and withdrawals within set limits,” van Wyk added.

By understanding and applying these tax-saving strategies, South Africans can legally minimise their tax burden and optimise their financial well-being.