Finance Minister Enoch Godongwana’s Budget 2025, presented last week after a failed first attempt and yet to be ratified by Parliament, was negative for consumers, who will face higher VAT and bracket creep on their taxable income, but who won’t be subjected to a higher fuel levy, higher personal income tax rates or a mooted wealth tax.
Commenting on the economic outlook, Ronald King, Head: Public Policy & Regulatory Affairs at PSG Wealth, says National Treasury expects South Africa’s economy to grow at an average 1.8% per year from 2025 to 2027, with recovery supported by improved investor confidence, stabilisation in the supply of electricity, and lower interest rates.
“Medium-term forecasts are reinforced by higher investment and household consumption, supported by a stable inflation outlook, moderate gains in employment and an improvement in household balance sheets,” King says. “In addition, continued easing of structural and logistical constraints is essential to accelerate growth and boost the economy by encouraging investment.”
Despite the positive outlook, the government is asking taxpayers for more money. One reason is that it needs to continue funding the Social Relief of Distress Grant introduced during the Covid-19 pandemic, which is now a Universal Basic Income Grant in all but name.
VAT hike
The boldest Budget proposal, which is likely to come under fire from GNU co-parties and opposition parties, is the 0.5% VAT hike this year with another 0.5% rise planned for next year. The last VAT hike, from 14% to 15% in 2018, was highly unpopular among the poorer sectors of society.
To cushion the effect on the poor, the Minister proposed enlarging the zero-rated food basket to include the edible offal of sheep, poultry, goats, pigs and cows; cuts such as heads, feet, bones, and tongues; dairy liquid blends; and canned vegetables.
Other taxes
No adjustments were made to the SARS income tax rates, which remain the same as the 2024/25 tax year.
| Taxable income | Rate of tax |
| R1 – R237 100 | 18% of taxable income |
| R237 101 – R375 500 | R42 678 + 26% of taxable income above R237 100 |
| R370 501 – R512 800 | R77 362 + 31% of taxable income above R370 500 |
| R512 801 – R673 000 | R121 475 + 36% of taxable income above R512 800 |
| R673 001 – R857 900 | R179 147 + 39% of taxable income above R673 000 |
| R857 901 – R1 817 000 | R251 258 + 41% of taxable income above R857 900 |
| R1 817 001 and above | R644 489 + 45% of taxable income above R1 817 000 |
Likewise, no adjustments have been made to the primary, secondary and tertiary rebates, medical tax credits, capital gains tax, estate duty, dividend withholding tax, donations tax or the corporate tax rate.
Effective from 1 April 2025, the transfer duty brackets have been raised 10%, with the aim of providing some relief to homebuyers and boosting the residential property market.
There were above-inflation increases in the so-called “sin taxes” on tobacco and alcohol, but the general fuel levy remains unchanged.
There were no changes to thresholds and limits regarding retirement fund contributions and tax-free savings accounts.
Bracket creep
Carla Rossouw, head of tax at Allan Gray, says that, because the income tax brackets have not been adjusted for inflation, your tax as a normal salaried worker will effectively go up by more than inflation if you move up the brackets, leaving you with less money to pay bills.
“This is commonly referred to as ‘bracket creep’ and a ‘silent’ revenue generator for the government, as it is not immediately evident to most taxpayers. With no increase in the tax brackets, if your salary goes up by inflation but the tax brackets remain the same, you come out poorer,” she says.
Wealth tax
Despite rumours ahead of the Budget speech, there was no mention of a wealth tax as an additional revenue source, Rossouw says. However, there is a continued focus on extracting more from the rich.
“Treasury indicated that they are working with SARS to understand the levels of wealth that have been declared to SARS in considering a potential wealth tax for high-net-worth individuals. No final decision has yet been made on the proposal. Currently, individuals holding assets valued at R50 million or more are required to declare all their wealth to SARS as part of their annual tax return filing,” Rossouw says.
