Everybody is talking about the budget and the VAT increase, but have you considered the corroding effects of inflation…
The news has been ablaze with much talk about the adoption of the budget, the finance minister, his main talking points, who agrees and who doesn’t, but what does this mean to all South Africans?
A revised Budget, finally tabled on 12 March, proposed a 0.5% VAT increase from 1 May 2025, with a second 0.5% VAT increase from 1 April 2026, As much of the focus has been on the proposed VAT increase, many South Africans are not aware of the many other tax increases, a lot of them indirectly.
The most notable one is that the minister has kept the individual tax tables unchanged for the second year in a row. What this means is that if you received a salary increase, you would move up into a higher tax bracket – so you would pay more tax as a percentage of your salary. This is a sore point for many as in a perfect world, the tax brackets would increase every year by inflation to keep us all on the same tax rate.
There are a few other ways that the government is taxing us, Capital gains Tax (CGT) has remain unchanged for years. This means that by not increasing with inflation in almost a decade, there are more profits being captured for tax. In addition, for small businesses, the fact that the threshold for VAT has remain unchanged for over a decade at R1M, means increasing costs to thousands of small businesses.
Is there any good news?
In a media interview following the Budget Speech, the minister said that if the economy does well, the VAT increase in 2026 may not be necessary.
A R1 trillion investment over the next three years in public infrastructure spending, focused on transport and logistics, energy, and water and sanitation, should positively impact on the economy.
How best to manage your taxes going forward?
There has been much uncertainty over the past weeks around the budget and the adoption. What is important is to keep focus on how does this affect me? Preparing by proper planning could assist you in dealing with the above.
Bottom line is that tax collection remains the government’s main source of revenue and there has been a huge focus on SARS’ tax collection capabilities with billions more in funding. It would be well-advised to rely on our expertise and advice to determine the impact of Budget 2025 on your personal as well as business tax affairs.
