Budget Speech Update 2025
The 2025 National Budget was delivered in Parliament yesterday by South African Finance Minister Enoch Godongwana. The two key changes were as follows:
VAT
The 2025 Budget speech is finally over the line after the initial attempt came undone following disagreement among political parties over a controversial 2% VAT hike. The delay reflected both the determination of our young government of national unity (GNU) to do things differently, as well as its growing pains amid weak economic growth and simmering geopolitical tensions. To raise the revenue needed, the government proposes to increase the VAT rate by 0.5% in 2025/2026 (effective 1 May 2025), and by another 0.5% (effective 1 April 2026).
The 2025 Budget speech is finally over the line after the initial attempt came undone following disagreement among political parties over a controversial 2% VAT hike. The delay reflected both the determination of our young government of national unity (GNU) to do things differently, as well as its growing pains amid weak economic growth and simmering geopolitical tensions. To raise the revenue needed, the government proposes to increase the VAT rate by 0.5% in 2025/2026 (effective 1 May 2025), and by another 0.5% (effective 1 April 2026).
Bracket Creep
The tax thresholds, rebates and PIT brackets will not be adjusted upwards to account for inflation, unlike what we saw in the untabled Budget on 19 February. This means that, as a normal salaried worker, your tax 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. The PIT proposals are effective from 1 March 2025 and are expected to raise revenue of R19.5 billion. No changes to medical tax credits were proposed.
The tax thresholds, rebates and PIT brackets will not be adjusted upwards to account for inflation, unlike what we saw in the untabled Budget on 19 February. This means that, as a normal salaried worker, your tax 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. The PIT proposals are effective from 1 March 2025 and are expected to raise revenue of R19.5 billion. No changes to medical tax credits were proposed.
Allan Gray’s Head of Tax, Carla Rossouw, unpacks the Finance Minister Enoch Godongwana’s speech at the link below.
https://www.allangray.co.za/latest-insights/personal-investing/2025-gnu-budget-round-2-prioritising-sustainable-growth-in-uncertain-times/
https://www.allangray.co.za/latest-insights/personal-investing/2025-gnu-budget-round-2-prioritising-sustainable-growth-in-uncertain-times/