In late February, Finance Minister Enoch Godongwana has presented this year’s Budget Speech – giving updates on how South Africans can expect their finances to change over the coming year.
Outlining his speech, the Minister stated that “Households and businesses are still under financial pressure and are coping with higher obligations, the effects of Covid-19 and increased fuel prices. Now is not the time to increase taxes and put the recovery at risk”.
Many of the changes introduced by the government will impact how South Africans manage their budget – we explore major changes to taxes and personal finances that can help you plan ahead.
Economic growth for the next three years
In positive news for our country, Minister Godongwana announced that South Africa’s economy is expected to grow at an average of 1.8% over the next three years.
Boosting youth employment
Government has announced that a budget of some R18.4 billion Rand has been allocated to boost youth employment and to create short-term jobs, which will be welcome news for South Africans seeking employments. The government has yet to announce which ventures will offer employment for South Africans into the future.
No increases to the fuel and RAF levy
While the price of petrol will continue to vary, Minister Godongwana noted in his budget speech that government will not increase the fuel and RAF levy for this financial year – meaning that while fuel price increases could remain on the cards, the government will not elect to add additional taxes or levies to the price of fuel.
Notably, this marks the first occasion that the levy has not been increased since 1990.
Tax brackets will be increased in line
In good news for working South Africans, Minister Godongwana issued tax relief in line with a 4.5% inflation rate – meaning that South Africans will be spending less money on their income tax during this financial year.
The Minister further announced that the annual tax-free threshold for a person under the age of 65 will increase to R91 250.
Remind me, what are tax brackets?
Income Tax Brackets define the amount of tax an employee will pay based on their annual (yearly) income. ‘Brackets’ are defined by the South African Revenue Service, and can vary from time to time. For more insight as to how this affects your finances, read our detailed guide on understanding your income.
Social grant payouts will increase
As part of changes to South Africa’s social grant structures, beneficiaries will see their social grants increase by 5%, while beneficiaries on child support will see an increase of 4.3%.
High net-worth individuals will pay more tax
In a major change, Minister Godongwana has clarified that, for the first time, high-net worth individuals will need to declare their specified assets and liabilities at market values in their tax returns. This means that individuals with a net worth of over R50 million will likely pay more tax towards their activities and the appreciation of their assets over time.
Changes to the sugar levy
Government has further increased the levy on sweetened drinks by 4.5%, meaning that products such as sweetened soda or other sweetened carbonated drinks will cost more.
Changes to taxes on alcohol and tobacco
As part of a package set of changes towards sin taxes, the government has issued a 4.5% increase on tax of the sale of alcohol, and a 1% change to taxes on the sale of tobacco products. Notably, this now also includes vaping products, marking the first time that government has endeavored to tax e-cigarettes and similar products.
What is sin tax?
‘Sin’ tax is a form of excise tax that is levied on goods that are deemed to be harmful to the health of both society and individuals. This can include items such as:
- Alcohol,
- Tobacco,
- Soft drinks,
- And gambling, among others.
Update your budget
Each year’s budget speech brings changes to how we can expect to manage our expenses and income, and this year is no different. To help you plan ahead, our free budget template, available in PDF and Excel formats, can help you track changes to your planned expenses and help you manage your savings goals.
