According to the tax proposals in Finance Minister Enoch Godongwana’s Budget speech yesterday, the only things that will change for individuals in the 2024/25 tax year will be above-inflation increases in the so-called “sin taxes” on tobacco and alcohol and an increase in the levy on plastic bags.
In a surprise move, the minister did not announce an increase in the fuel levy.
All personal income tax brackets, rebates, thresholds, tax credits and exemptions remain the same as the 2023/24 tax year.
This does not mean, however, that individuals will be paying the same amount of tax. The income tax brackets have purposefully not been adjusted for inflation, with the result that if one’s income increases by the inflation rate (or more), a slightly larger portion of that income will go to the taxman. This is known as “bracket creep”, and it is a common way for the government to increase what it receives from taxpayers without imposing higher tax rates on them.
The 2024 Budget Review document estimates that the government will be able to collect an additional R18.2 billion by not making inflationary adjustments to the tax brackets and medical tax credits, although it expects to lose about R4bn by not increasing the fuel levy.
Jurgen Eckmann, a wealth manager at Consult by Momentum, said the consequences for taxpayers were not insubstantial.
“The personal income tax brackets were not adjusted, which is welcome, but consumers who ultimately get their annual increase and move into a higher tax bracket will ultimately have less in their pockets.
“Sin taxes are an ‘easy’ or ‘lazy’ way of generating revenue because we, as South Africans, love our vices. These seldom act as a deterrent; consumers will continue to consume and pay the higher prices. Something else to consider is that retailers often see these sin tax increases as an opportunity to hike up their own prices, meaning that we ultimately pay an even higher price for our sins,” Eckmann said.
Taxes on individuals
• Personal income tax: The personal income tax tables remain the same for the 2024/25 tax year, along with the primary, secondary and tertiary rebates. The negative effects of bracket creep, as mentioned above, will extend to lower-income earners and pensioners. The tax thresholds, below which the rebates offset any tax payable in a particular tax year, have not changed. South Africans below 65 years whose annual income after deductions is less than R95 750 are not liable for tax. For people aged 65 to 74 years, the threshold is R148 217 and for people of 75 years, it is R165 689.
• VAT: VAT remains at 15% on qualifying goods and services.
• Levies and excise duties: The minister has proposed increases of between 6.7% and 7.2% on alcoholic beverages and between 4.7% and 8.2% on tobacco products. The plastic bag levy will increase from 28c to 32c a bag on April 1. There will be no change to the general fuel levy or the road accident levy.
• Capital gains tax: For individuals, the rates remain unchanged – a R40 000 exclusion on a gain, with 40% of the resulting amount included in taxable income. The annual exclusion in the year of death is R300 000.
• Dividends tax: The withholding tax of 20% remains on dividends paid by resident companies and non-resident companies listed on the JSE.
• Estate duty: This remains at 20% on the dutiable value of an estate of up to R30 million and 25% on amounts above R30m. The basic deduction of R3.5m has also not changed.
• Donations tax: This remains at 20% on donations of up to R30m and 25% on amounts above R30m. The first R100 000 is exempt from tax.
• Tax on retirement fund withdrawals: The tax tables for lump-sum withdrawals before retirement and at retirement have not changed. The tables are available on the SA Revenue Service (Sars) website.
• Transfer duty: The table of transfer duty rates applicable to property transfers has not changed. Refer to the Sars website.
Exemptions and deductions
• Interest income: On interest from a South African source, the first R23 800 is exempt from tax for people under 65 years of age. For people of 65 years and older the exemption is R34 500.
• Retirement fund contributions: The deductions on contributions to retirement funds remain as last year – contributions are fully deductible up to 27.5% of your remuneration or taxable income, limited to R350 000 per year. Contributions exceeding these limits may be carried forward to the following tax year.
• Medical tax credits: These have not been changed. The calculations for individuals under 65, individuals of 65 years and over, and people with disabilities are explained on the Sars website.
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