Bad news for South African taxpayers

The National Treasury once again opted not to adjust South Africa’s personal income tax brackets for inflation, which will generate an additional R15.5 billion in revenue in the 2025/26 fiscal year.

Finance Minister Enoch Godongwana delivered the third version of South Africa’s 2025 Budget on Wednesday, 21 May 2025.

This came after the first two versions were rejected by Parliament and opposed by members of the Government of National Unity.

Unlike the first two versions, this third attempt does not include a proposal to hike South Africa’s value-added tax (VAT) rate.

This means the government will lose out on the additional revenue this VAT increase would have provided.

Compared to the National Treasury’s March estimates, it has revised down tax revenue projections by R61.9 billion over the next three years.

“In this difficult environment, it remains vital that we still take actions to increase revenue to protect and bolster frontline services, while expanding infrastructure investments to drive economic activity,” he said.

Now, the government will find the additional revenue it needs by withdrawing the additional zero-rated items introduced in the first two budgets and proposing an inflation-related increase in the fuel levy.

In addition, South Africa’s personal income tax brackets will again not be adjusted for inflation, effectively implementing a “stealth tax” on the country’s taxpayers.

By not adjusting these brackets for inflation, the government gives rise to ‘bracket creep’, which happens when inflation-driven salary increases push earners into higher tax brackets.

This means South African workers may find themselves taking home less money at the end of every month, despite personal income tax rates remaining unchanged.

The National Treasury’s Budget overview revealed that no inflationary adjustment to tax brackets and rebates will add R15.5 billion to the government’s tax revenue in 2025/26.

The table below shows how the proposed tax changes in the 2025 Budget will impact the government’s revenue over the next three years.