The contentious postponement of our 2025 Budget Speech raised a number of important questions and made the past few weeks somewhat tense for many. As an optimist, my thoughts on the postponement were positive, as it forced important conversations regarding government spending and how we would realistically increase economic growth.

Each year, post the budget speech, we have had no choice but to accept the finality of the decisions made for us. Since we are now under a Government of National Unity, we finally have the chance to critically examine government spending, explore innovative strategies for sustainable economic growth, and address the pressing issue of rising taxes.

The speech was off to a tense start with the MK party insisting on an apology for the last-minute postponement on 19 February. In a calm manner, Enoch Godongwana appeased his audience and added some ice-breaking humour with a Kaizer Chiefs joke.

As we all know, our economy needs to grow, and Enoch explained that their approach is pragmatic with a view to scaling up infrastructure to promote economic growth and creation of employment.

Increasing corporate and income tax rates would have hindered economic growth and job creation. Therefore, a balance needed to be struck.

Enoch mentioned focusing on stabilising the cost of debt this tax year. Currently, 22 cents of every R1 of tax collected goes towards servicing the cost of government debt.

The main highlight was the anticipated announcement of a 0.5% increase in VAT effective as of 1 May 2025, with a further 0.5% VAT increase effective 1 April 2026. The basket of zero-rated items will also be expanded to include canned vegetables, edible sheep offals, poultry and other animals, and dairy liquid blends.

There are no increases in Corporate and Personal Income Tax rates, as well as no increase in the fuel levy and Road Accident Fund (RAF) levy.

It is very important to note here, that for the second year in a row, there will be no inflationary increase in Personal Income Tax brackets, normal rebates and medical rebates. The result of this is, as your level of taxable income goes up, you creep into a higher tax bracket, and in turn face an increase in your personal tax.

Wealth Taxes, such as Estate Duty, Dividends Withholdings Tax, Transfer Duty and Capital Gains Tax have remained as is.

The above proposed increase in VAT is expected to raise additional revenue of R28 billion in 2025/2026 and R14.5 billion in 2026/2027.

This is a drop in the ocean when considering a current budget deficit of R374.7 billion (previously R347.5 billion), representing 5% of GDP (Gross Domestic Product). The budget deficit is how much spending exceeds revenue (tax collections).

However, this increase is not immaterial to South Africans and the impact on our cost of living.

Comments from our president post the Budget Speech, included awaiting feedback from the parties, which will then be considered and dealt with. We are fully aware that the DA and other parties within the GNU are not in agreement and have rejected the VAT increase. They will deliver their opposing arguments in April.

This is an unprecedented time, where we will witness the DA and other parties within the GNU fight back against the budget speech proposals, which will hopefully lighten the tax burden on South Africans.

Post-budget speech comments from the DA and other parties included:

• drawing our attention to the bloated cabinet that should be reduced,
• fruitless bailouts of SOEs such as the SA Post Office and SAA,
• civil servant wages representing more than 50% of our GDP (highest worldwide) and the agreed-upon increase in these wages,
• the continuation of the SRD Grant introduced 5 years ago due to Covid-19, which was supposed to be temporary,
• legislation that is hindering foreign investment in South Africa,
• and clarifying the Land Expropriation Act with the US who are misinformed – which has left us skating on thin ice.

Notably, Edward Kieswetter commented that approximately 45% of the R800 billion revenue target is attributable to outstanding tax collections with the remaining 55% relating to non-compliance, illicit trade, and aggressive tax planning.

Other pertinent points of the Budget Speech are summarised below:

Personal income tax

For the second year in a row, there are no inflationary adjustments to the personal income tax brackets. The concern here is that there is no relief provided for tax bracket creep, which in turn will result in less disposable income for households.

Tax threshold

This refers to the amount of income that you can earn before you need to pay tax. The thresholds have remained as is:

• The yearly tax threshold for those under the age of 65 is R95 750,
• for those between 65 and 75, the tax threshold is R148 217,
• and if you are 75 or older, the threshold is R165 689.

Interest exemption

This remains unchanged. If you are under 65, the annual interest exemption is R23 800, and if you are 65 or older, the annual exemption is R34 500.

What do unchanged tax thresholds and interest exemptions mean for you?
If you are between the ages of 65 and 75, you can earn a yearly income of R148 217 plus R34 500 interest before you have to pay tax. If you are 75 or older, you can earn an annual income of R165 689 plus R34 500 interest before you have to pay tax.

Tax-free savings account contributions

The amount that you can contribute towards a tax-free savings account remains unchanged at R36 000 per year with a lifetime contribution limit of R500 000.

Dividends Withholding Tax

Dividends Withholding Tax remains unchanged at 20%.

Retirement fund contributions

The tax treatment for contributions to retirement funds remains unchanged and is limited to 27.5% of taxable income. The dedication is further limited to the lower of R350 000 or 27.5% of taxable income before the inclusion of a taxable capital gain. Any contributions exceeding the limitations are carried forward to the following year of assessment.

Retirement and withdrawal tax tables

At retirement a member of a retirement fund is entitled to withdraw a tax-free lump sum from their retirement fund savings. The tax-free limit at retirement remains at R550 000.

The withdrawal tax table has also remained as is. A member who wishes to withdraw an amount from their retirement fund before retirement is entitled to the first R27 500, tax-free.

Foreign Pensions

It is proposed that changes be made to the rules that currently exempt lump sums, pensions and annuities received by South African residents from foreign retirement funds for previous employment outside South Africa. Amendments to such rules will be made in the current legislative cycle, where a Bill is drafted and progresses through Parliament.

Capital Gains Tax (CGT)

The capital gains exemption thresholds remain the same:

• The annual exclusion stays at R40 000,
• the exclusion amount of death at R300 000,
• and the primary residence exclusion at R2 million.

The capital gains inclusion rates also remain at 40% for individuals and 80% for companies and trusts.

Medical aid tax credits

Medical tax credits have remained as is:

• R364 per month for the first two members,
• and R246 per month for each additional dependent.

National Health Information System (NHI)

Treasury has allocated R9.9 billion to NHI, demonstrating a continued commitment to this policy. Once again, much work is needed to be done such as building a national health information system, upgrading health facilities and improving the quality of care to name a few. An additional allocation of R28.9 billion has been granted to keep 9 300 healthcare workers employed.

Estate Duty

Estate Duty tax remains unchanged. The estate duty abatement (exempt threshold) remains at R3,5 million per person, and the surviving spouse may benefit automatically from any unused deduction in the first dying spouse’s estate. In other words, the abatement remains a combined maximum of R7 million for the second dying spouse.

Estate duty for dutiable estates up to R30 million remains at 20%, and is 25% for dutiable estates over R30 million. You do not pay Estate Duty on the value of your Retirement Funds, Living Annuities or on the value of assets you leave to your surviving spouse.

Donations Tax

Donations tax is levied at a flat rate of 20% on the cumulative value of property donated, not exceeding R30 million, and 25% for amounts exceeding R30 million. The first R100 000 of property donated in each tax year by a natural person is exempt from Donations tax.

Transfer Duty

The purchase amount free of Transfer Duty is adjusted upward by 10% to compensate for inflation. A property costing less than R1,210,000 will attract no duty. A 3% rate applies between R1,210,001 and R1,663,800; 6% between R1,663,801 and R2,329,300; 8% between R2,329,301 and R2,994,800; 11% between R2,994,801 and R13,310,000; 13% thereafter.

Foreign exchange

The offshore investment allowance remains at R10 million per adult per calendar year. In addition the R1 million single discretionary allowance per calendar year remains.

Tobacco and alcohol

Excise duties will increase by 6.75% for alcoholic beverages and by 4.75% for tobacco.

A packet of cigarettes will cost an additional R1.04, and a can of beer will cost 16 cents more. A bottle of wine will cost 48 cents more and sparking wine will cost 98 cents more. A bottle of spirits, including whisky, gin or vodka, will cost R5.97 more.

Fuel levy

To provide some relief to households (a welcomed silver lining) there has once again, been no increase to the general fuel levy on petrol and diesel for 2025/26. There will also be no increase in the Road Accident Fund levy.

Environmental Taxes

Carbon tax is increased from R190 to R236 per tonne of carbon dioxide equivalent.
The carbon fuel levy will increase to 14 cents per litre for petrol and 17 cents per litre for diesel.

The plastic bag levy remains at 32 cents per bag.

Sugar tax

There will be no change to the health promotion levy.

Value-added Tax (VAT)

A proposed VAT increase of 0.5% in the 2025/2026 year, effective 1 May. A further proposed increase of 0.5% in the 2026/2027 year effective 1 April 2026, resulting in VAT increasing to 16% over the next two years. VAT is levied on the supply of goods and services by registered vendors. This will increase the cost of living for South Africans.

Corporate income tax

There is no change to the Corporate Tax Rate of 27%.

Conclusion: Will the GNU Deliver Real Change?

This year’s budget speech has ignited widespread debate, offering a real-time case study on the complexities of governing under a Government of National Unity. While the proposed VAT increases and lack of tax relief have raised concerns about the rising cost of living, the broader discussion has shed light on urgent fiscal challenges, from government debt to public spending inefficiencies. The coming weeks will be crucial as opposition parties contest key proposals, potentially reshaping aspects of the budget before it is passed. For now, South Africans are left weighing the trade-offs between economic pragmatism and political negotiation—watching closely to see how this chapter in our country’s financial future unfolds.