Originally scheduled to take place on 19 February 2025, the budget speech was postponed and delivered on 12 March 2025. The Minister of Finance, Enoch Godongwana, pointed out that this postponement is a feature of multiparty governance. The delay sparked an unprecedented level of public debate, highlighting the difficult policy trade-offs that we face as a nation. What’s clear is that the issues at stake are not just fiscal concerns but a reflection of the broader challenges in balancing diverse priorities for the future.

The 2025 budget proposes a bold and pragmatic approach to achieving this formidable task, offering a pathway that aims to address immediate economic pressures while laying the foundation for sustainable long-term growth.

The highlights

• The VAT rate is proposed to increase from 15% to 15.5% from 1 May 2025 and to 16% on 1 April 2026. However, the VAT zero-rating scheme will be extended to include edible offal, specific cuts of meat (e.g. heads, feet, bones and tongues); dairy liquid blends; and tinned vegetables
• The government will reach the important milestone of stabilising debt next year through the strengthening primary surplus, in other words, increasing what the government earns in relation to what it spends (excl. debt repayment). Debt servicing costs, which currently amount to R390 billion (22% of all the money the government collects), are unlikely to change.
• Real economic growth is forecast to increase to 1.9 per cent in 2025.
• 61% of the budgeted spend goes to the social wage. This means funding the departments responsible for health, education, social protection, community development and employment programmes.
• Total consolidated government spending is expected to grow at an average annual rate of 5.6%, from R2.4 trillion in 2024/25 to R2.83 trillion in 2027/28.
• Tax revenue for 2024/25 is expected to amount to R1.85 trillion (R16.7 billion less than budgeted).
• SARS is gets an additional R3.5 billion over the next three years to improve tax compliance .

Tax specific matters

• SARS lost three important Constitutional Court cases in 2024. In response, the 2025 budget aims to introduce legislation to counter those judgments:
• Following the Thistle and Coronation legal cases, legislation will be introduced to firm up the penalty regime in the Tax Admin Act.
• Following the Capitec legal case, an “insurance” definition is to be introduced in the VAT Act.
• Stealth tax increases continue through “bracket creep”. This means there are no changes to personal income tax rebates, medical credits or income tax brackets. Personal income tax still makes up the bulk of tax revenues at 40%.
• There are proposals to change the rules that currently exempt lump sums, pensions and annuities received by South African residents from income tax?
• The tax regime on preference share funding schemes is to be tightened.
• In 2023, the “flow-through” principle applicable to South African trusts was limited to South African beneficiaries. Certain unintended consequences have been (correctly) identified, which will be revisited in proposed legislation.
• The two-year renewable energy incentives introduced in 2023 have finally ended.
• A customs voluntary disclosure programme (VDP) will be introduced.
• Government aims to expand South Africa’s tax treaty network and renegotiate some existing treaties.

Monetary amendments

The more things change, the more they stay the same. There are no changes to:

• Personal income tax brackets, rebates or medical tax credit
• Capital gains tax (CGT) rates and exclusions.
• The general fuel levy, customs and excise levy and the road accident fund levy.

There are significant changes to:

• VAT, with two consecutive 50bps rate increases.
• Transfer duty brackets – each to increase by 10%.
• Sin taxes with above-inflationary increases.

Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.