{"id":816793,"date":"2025-03-14T07:00:00","date_gmt":"2025-03-14T05:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=816793"},"modified":"2025-03-13T16:42:06","modified_gmt":"2025-03-13T14:42:06","slug":"good-news-for-south-african-taxpayers","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/816793\/good-news-for-south-african-taxpayers\/","title":{"rendered":"Good news for South African taxpayers"},"content":{"rendered":"\n
The revised 2025 Budget, tabled by Finance Minister Enoch Godongwana on Wednesday, 12 March, is good news for South African taxpayers.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
The initial 2025 Budget proposed a two percentage points increase in value-added tax (VAT) from 15% to 17%.<\/p>\n\n\n\n
This would have significantly increased the price of most products in South Africa, impacting all population sectors.<\/p>\n\n\n\n
The initial budget also proposed increasing personal income tax brackets, which was positive for taxpayers.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
However, this initial budget was not accepted because many cabinet members opposed the significant increase in VAT.<\/p>\n\n\n\n
These cabinet members wanted the government to cut spending instead of taxing citizens more, which would benefit economic growth.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
This means that VAT will increase to 15.5% in 2025 and 16.0% in 2026. Despite the compromise on Godongwana\u2019s side, many parties vowed to fight this increase.<\/p>\n\n\n\n
The revised 2025 Budget removed the planned adjustments to the income tax brackets due to the lower VAT increase.<\/p>\n\n\n\n
This means that the personal income tax brackets will remain unchanged relative to 2024\/25, which will hurt taxpayers\u2019 pockets.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
The tables below show the difference in tax brackets from the initial 2025 Budget to the revised version tabled on 12 March.<\/p>\n\n\n\n
Initial Proposed Changes to The Income Tax Brackets<\/h2>\n\n\n\n
Taxable Income (R)<\/td>
Rate of Tax<\/td><\/tr>
1 – 248600<\/td>
18% of taxable income<\/td><\/tr>
248601 – 388400<\/td>
44748 + 26% of taxable income above 248600<\/td><\/tr>
388401 – 529200<\/td>
81096 + 31% of taxable income above 388400<\/td><\/tr>
529201 – 694500<\/td>
124744 + 36% of taxable income above 529200<\/td><\/tr>
694501 – 885400<\/td>
184252 + 39% of taxable income above 694500<\/td><\/tr>
885401 – 1875 100<\/td>
258703 + 41% of taxable income above 885400<\/td><\/tr>
1875 101 and above<\/td>
664480 + 45% of taxable income above 1875100<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
Unchanged Tax Brackets<\/h2>\n\n\n\n
Taxable Income (R)<\/td>
Rate of Tax<\/td><\/tr>
1 – 237100<\/td>
18% of taxable income<\/td><\/tr>
237101 – 370500<\/td>
42678 + 26% of taxable income above 237100<\/td><\/tr>
370501 – 512800<\/td>
77362 + 31% of taxable income above 370500<\/td><\/tr>
512801 – 673000<\/td>
121475 + 36% of taxable income above 512800<\/td><\/tr>
673001 – 857900<\/td>
179147 + 39% of taxable income above 673000<\/td><\/tr>
857901 – 1817000<\/td>
251258 + 41% of taxable income above 857900<\/td><\/tr>
1817001 and above<\/td>
644489 + 45% of taxable income above 1817000<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
The new budget is better for taxpayers<\/h2>\n\n\n\n
BusinessTech analysed the combined tax impact on an individual with the initial proposed and revised tax changes.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
For this analysis, BusinessTech assumed that taxpayers spent all their monthly earnings and would pay VAT on that amount.<\/p>\n\n\n\n
Although this sounds strange, this assumption is backed up by research regarding South Africans\u2019 spending habits.<\/p>\n\n\n\n
A study conducted by STANLIB found that from 2000 to 2019, the average household savings ratio in South Africa was -0.5 %.<\/p>\n\n\n\n
This means that, on average, households in South Africa save none of their income, spending 0.5% more than what they earn.<\/p>\n\n\n\n
BusinessTech compared the total tax paid, including personal income tax and VAT, between the two budgets.<\/p>\n\n\n\n
The comparison showed that the revised budget will have a smaller tax impact on all individuals than the initial budget.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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