SARS is quietly taking more money from everyone earning a salary in South Africa
The South African Revenue Service (SARS) is quietly lapping up billions of rands from South African workers and employees thanks to bracket creep.
This is a hidden tax on income earners made possible by not adjusting the tax brackets to match inflation each year.
According to Tax Consulting SA, the lack of inflationary relief is creating a “silent tax” that is slowly reducing take-home pay across the board.
This is starting to show in employee expectations, frustration, and payroll pressures.
SARS has estimated that it will collect an additional R19.5 billion this year from this source. It is expected to take R18 billion from income tax and a further R1.5 billion from medical aid tax credits, which also have not been adjusted for inflation.
Any employee who gets a salary increase higher than inflation ends up paying more, and those who are particularly fortunate to see an even bigger increase or even a promotion risk moving into a higher tax bracket entirely, giving even more to the state.
“While SARS has held tax rates steady, the real cost to employees continues to climb,” Tax Consulting said.
“As salaries increase modestly each year, whether through performance bonuses, annual inflationary adjustments, or fringe benefits, more income is pushed into higher tax brackets.”
Since tax brackets have not moved, employees are paying more tax on income that has not truly increased in purchasing power.
What employees will have seen happen is that their take-home pay starts shrinking, despite being paid more.
This will be even more pronounced in 2025, where employers are expected to be increasing salaries by more than inflation, with most surveys pegging projected pay increases between 5% and 6%, versus inflation of 3% to 4%.
SARS has projected an additional R19.5 billion in collections for the 2025/2026 tax year, which is directly attributable to this approach.
“That is a staggering number, and it is coming from the pockets of working South Africans, many of whom are already thinly stretched,” Tax Consulting said.
While bracket creep is not new, the compounding effect over several years is becoming hard to ignore, it said.
“The reality is that most of us have already ‘jumped’ a tax bracket or two in recent years, without feeling any wealthier for it.”
Wage workers suffer most
While salaried workers—typically middle to high income earners—will feel the strain of higher taxes, Tax Consulting said that low-income earners will also suffer.
This is because most low-income earners pull annual wages that fall below the taxable income threshold. This is currently at R95,750 per annum, or just under R8,000 a month.
However, this threshold has also not been adjusted for inflation, meaning workers who previously earned just below the threshold may suddenly find themselves in a taxable bracket, paying over 18% of their income to SARS.
“With static thresholds and modest pay increases over the past few years, more of these individuals are now subject to PAYE for the first time,” Tax Consulting said.
“This can be both confusing and demoralising. Employees who have not had any significant lifestyle change or meaningful raise are suddenly taking home less net pay than expected.”
The sense of loss is amplified by the sharp increases in the cost of essentials like transport, food, electricity, and school fees, it added.
The decision not to adjust the tax brackets effectively allows SARS to collect more revenue without increasing tax rates.
“From a policy perspective, this may seem like a win. But this ‘hidden tax’ is placing additional pressure on employees and creating unseen risks for employers in the form of reduced morale, higher staff turnover, and renewed demands for financial relief,” Tax Consulting said.
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