Finance Minister Enoch Godongwana announced inflation-linked tax relief for households, alongside fuel levy and sin tax increases in the latest Budget. (Photo: Freepik) After much speculation that tax brackets might not be adjusted for the third year in a row, Finance Minister Enoch Godongwana saw fit to deliver good news with inflation-adjusted personal income tax brackets and medical tax credits.
Bracket creep is a stealth tax that hits South African taxpayers when personal income tax brackets and rebates stay frozen while salaries rise nominally to keep pace with inflation. This was the case for the past two years, but this year tax brackets have been adjusted in line with expected inflation at 3.4%.
In what could be lauded as a “good news” Budget for the average Joe Public, other tax thresholds and limits have also been adjusted for inflation this year, which ultimately translates to you retaining a larger share of your income.
Income tax brackets: Those earning a monthly income of R8,250 or less won’t pay income tax under the new thresholds.
Medical scheme tax credits move from R364 to R376 for the first two members, and from R246 to R254 for additional members.
So, a family of four that was receiving medical tax credits (of R728 + R492 = R1,220) would now get (R752+ R508= R1,260) on a monthly basis.
That translates to annual medical scheme tax credits moving from R14,640 to R15,120 for a family of four.
Capital gains tax (CGT): if you sell your primary residence, the CGT exclusion has been increased from R2m to R3m.
CGT exclusion on death: has been increased from R300,000 to R440,000.
Donations tax threshold: has been increased from R100,000 to R150,000.
Tax-free savings accounts: the limit for annual contributions to tax-free savings accounts has been increased from R36,000 to R46,000.
The retirement fund contribution deduction limit has been increased for the first time in a decade from R350,000 a year to R430,000.
Travel allowance: If you plan to travel – the single discretionary allowance limit for individuals has been increased from R1-million to R2-million per calendar year via authorised dealers for all purposes, including travel, gifts, remittances, investments and donations.
To maintain purchasing power for travellers, the limit to South African bank notes that can be carried in cash when entering or exiting SA has been increased from R25,000 to R100,000.
The bad news
Fuel levy: It was inevitable that the hold on any increases in the fuel levy could not last indefinitely. From 2022/23, the tax burden for petrol and diesel has remained below 35% due to higher fuel prices and because fuel levies were not increased for three years.
- From Wednesday, 1 April the general fuel levy will go up to R4.10/litre for petrol and R3.93/litre for diesel.
- The Road Accident Fund (RAF) levy will be increased by 7c/litre to R2.25/litre.
- The carbon fuel levy will increase to 19c/litre for petrol and 23c/litre for diesel from 1 April 2026, as required under the Carbon Tax Act.
Sin taxes
After the roller coaster of good news (bracket creep relief) and bad news (fuel tax increases), you might be tempted to sit back, light up and ruminate with a glass of your favourite tipple.
As can be relied on every year, taxes on tobacco (including electronic nicotine and vaping) and alcohol will be adjusted in line with inflation (3.4%), effective immediately.
That means you can expect to pay:
- tax of 246.61 cents tax on a 340ml can of cider
- R23.58 in taxes (77 cents more) on a pack of 20 cigarettes
- R17.68 in taxes (58 cents more) on a pack of 20 heated tobacco product sticks
- R3.29 per ml (11 cents more) for vapes. This works out to R6.58 tax on a 2ml (standard size) vape and R26.32 to R78.96 tax for a “big puff” disposable
However, starting next year, sin tax increases will kick in from 1 April rather than immediately after the Budget, and the required legislative amendments to allow for this delayed implementation will form part of the taxation laws amendment bills this year. DM