How the 2025 Budget Speech affects your financial future

Finance Minister Enoch Godongwana delivered this year’s postponed Budget Speech, which presented a budget subject to Parliamentary approval. Knowing how the proposed Budget Speech affects you will give you the power to take control of your finances, relook at your financial plan, and have confidence in your financial future.

The Budget Speech isn’t just about big numbers for the nation – it is also about how it will affect us; from Parliament to person. Sanlam is here to make sure you’re not left budget ‘speechless’. We’re breaking down the jargon and key takeaways to give you an understanding of what it all means for you.”

What is the Budget Speech all about?

In a thriving economy, people and businesses would find it more manageable to pay more tax. This, in turn, allows the government to spend money collected from taxes on short- and long-term priorities like healthcare, education, and infrastructure. On the other hand, an economy that does not grow sufficiently means the government has less money to spend. This year’s Budget Speech notes that South Africa’s economy grew by only 0.6% in 2024 and is expected to average 1.8% over the next few years. This slow growth makes it challenging for the government to fund its priorities.

In this way, the country’s budget is just like yours – how much you get in should determine how much you can spend. The Budget Speech has an income section, which refers to where the government gets its money from, and an expenses section, referring to how the government will spend this money. The expenses section deals with how our collective tax money will be spent to provide services to all of us.

While the Budget Speech deals with income and expenses over the next year, it also relates to medium-term spending as well as some very long-term implications for the financial situation of consumers. Just like you and I cannot keep on borrowing to fund our lifestyles, similarly, the government needs to manage its debt levels and how it will be able to repay this debt over the medium term. This year’s speech notes that 22 cents of every rand collected in taxes is going towards servicing the country’s debt.

How will the Budget Speech affect our pockets in the short term?

Changes to the different taxes will affect how much you receive of your salary every month (income tax and deductions) and how much you pay for certain things, that may be impacted by VAT and sin taxes.

Income tax

The personal income tax tables are reviewed annually to ensure that annual salary increases meant to keep up with inflation do not automatically push taxpayers into a higher tax bracket. However, this year – same as last year – it is proposed that no adjustment will be made to personal income tax brackets, increasing tax revenue.

When personal income tax brackets remain unchanged while salaries increase to account for inflation, some individuals move into higher tax brackets. This results in a higher proportion of their income being taxed, which may leave them with less take-home pay than expected.

VAT INCREASE

Value-added tax (VAT) is a consumption tax placed on the value added at every stage of a product’s production and distribution. To boost revenue, it is proposed that the VAT rate increases from 15% to 15.5% for this year and to 16% next year.

Now, for the first time since 2018, you will pay 0.5% more for most goods and services, which could strain your household budget considerably. On the positive side though, the basket of VAT zero-rated food items has been expanded significantly.

Sin taxes

Sin taxes are levied on products or activities that are considered harmful or undesirable. These taxes are typically implemented to discourage consumption of the taxed products and to raise revenue for the government. As was the pattern over the last number of years, there has been an increase in sin taxes.

Fuel levy

The general fuel levy has been extended for another year, meaning there will be no inflationary increase in the fuel levy. This decision will save South Africans around R4 billion, keeping fuel prices more stable and easing pressure on transport costs that affect groceries and services.

How will the 2025 Budget Speech affect us over the longer term?

The Budget Speech is not all about tax. The Finance Minister stressed the importance of household savings, noting that South Africa’s high debt levels and low savings rates are unstable. With high debt levels and low savings levels, as a nation, we are consuming today what we have not yet earned tomorrow. Not saving enough and withdrawing retirement savings before retirement mean that few South Africans can afford to retire comfortably. Notably, this year, there are no changes to the tax rates on withdrawal or other retirement benefits. 

How do you make the Budget Speech work for you?

Take this moment to revisit your own budget. Remember, small changes add up, so double down on your positive money habits. Leverage your tax deductions and make the most of annual allowances for tax-free savings accounts and retirement fund contributions. Take the first step towards financial confidence by getting real about your finances. Have critical money conversations with family and friends to learn from one another and set shared goals. Living with financial confidence comes from having a plan, adjusting it when necessary, and sticking to it as closely as possible.

* Tobias is an actuary and head of marketing and communications at Sanlam Risk & Savings.

PERSONAL FINANCE