Bad news for South Africans earning more than R8,000 per month

The 2024 Budget tabled by Finance Minister Enoch Godongwana on Wednesday contained an easily overlooked addition that will raise the effective tax of low to middle-income earners in South Africa.

In his speech, Godongwana said revenue is mostly raised through personal income tax by not adjusting the tax brackets, rebates, and medical tax credits for inflation.

The National Treasury’s supplementary budget documentation revealed that the tax brackets will be frozen for the next three years.

The current personal income tax brackets apply to everyone earning over R95,750 per year. This equates to around R8,000 per month over twelve months.

Many experts highlighted that the three-year freeze on tax bracket adjustments, known as “bracket creep”, is bad news for South Africans earning an income.

Bracket creep means inflation pushes some taxpayers into higher tax brackets, making them pay more tax despite personal income tax rates remaining the same.

Many who currently fall outside the R95,750 per year income tax threshold will also be pushed into the taxpaying population through salary increases.

Head of tax at Allan Gray Carla Rossouw said bracket creep is an effective way to raise revenue as the impact on household income is not immediately evident to the public.

“The tax brackets remain the same, but if your salary goes up by inflation, you come out poorer,” she explained.

Sanlam Investments chief economist Arthur Kamp said the three-year bracket creep will hurt anyone within the personal income tax brackets.

“This effectively increases personal income tax by a cumulative R58.2 billion over the previous medium-term projection,” he said.

Solidarity Research Institute economic researcher Theuns du Buisson said bracket creep will cause further pain to citizens already under financial pressure.

“For the first time in a few years, it is now again possible that a salary increase can result in a person landing up in a higher tax bracket,” he said.

Because tax brackets will not increase along with the salaries, taxpayers will part with a larger portion of their salaries.

“Therefore, ordinary salary earners will once again have to bite the bullet due to the state’s mismanagement,” Du Buisson said.

He also bemoaned that medical tax credits were not adjusted by more than inflation, considering the big rise in medical aid premiums.

Personal income tax rates and bracket adjustments


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