Finance Minister Enoch Godongwana presented the 2024/2025 budget speech on 21 February 2024, setting the stage for a year filled with optimism. As long as you pair this optimism with some cautious financial planning and sound strategies, it could also be a year of growth for you or your company. The budget speech, eagerly awaited by citizens and financial experts alike, outlined a series of measures aimed at maintaining economic stability while addressing some of the most pressing challenges facing our country.

Tax Rates: No Major Changes

One of the key takeaways from the budget speech was the decision to keep the Value Added Tax (VAT) steady at 15%. This move, aimed at ensuring stability in the consumer market, means that the prices for most goods and services will not increase due to a hike in VAT, providing some relief to consumers across the board.

Similarly, businesses received news that the corporate tax rate would remain unchanged at 27%. This decision is quite significant as it provides a stable tax environment for big and small businesses, encouraging investment and potentially leading to job creation. Corporate tax rate stability is crucial for local and international investors eyeing the South African market.

It was also announced that there would be no changes to subsistence allowances and advances for travel, maintaining the current rates for meals, incidental costs and allowances for both local and foreign travel. Similarly, the rates for calculating travel allowances and the value of vehicles for tax purposes remained unchanged.

Of course, taxpayers were closely watching for changes in personal income tax rates and rebates. Surprisingly, the budget speech confirmed that there would be no adjustments to the personal income tax tables, medical tax credits or rebates. This means that individuals will not see an increase in their tax rates, and the primary, secondary and tertiary rebates will remain at their current levels. This is aimed at providing some stability to taxpayers amidst rising economic uncertainties.

This table outlines the tax rates applicable to various income brackets, as well as the rebates available to taxpayers based on age:

Tax Relief Measures Announced

In a surprising and welcome announcement, the finance minister declared that the general fuel levy and the road accident fund levy would also not see increases this year. This decision translates to a tax relief of around R4 billion, directly impacting the cost of fuel for consumers and businesses. Given the critical role of transportation in the economy, this move is expected to have a positive ripple effect across various sectors.

Increased Duties on Alcohol and Tobacco

However, not all news was about maintaining the status quo. The budget speech announced increases in excise duties on alcohol and tobacco products, with alcohol duties rising between 6.7 and 7.2 percent, and tobacco products between 4.7 and 8.2 percent. These adjustments are part of the government's broader health and social strategies, aiming to reduce consumption while increasing income from these goods.

Boost for Education and Health Sectors

Education and health were highlighted as priority sectors, with the education sector receiving an additional R25.7 billion and the health sector allocated a total of R848 billion. These investments underscore the government's commitment to improving the quality of life for all South Africans through better education and healthcare services.

The Two-Pot Retirement Proposal

Another notable point was the confirmation of the two-pot retirement proposal, which allows for the first withdrawals from September 2024. This initiative aims to provide more flexibility to savers by allowing them to access a portion of their retirement savings under certain conditions, a move that has drawn significant interest from the public and financial planners alike.

What Does This All Mean for Taxpayers?

The 2024/2025 budget speech presented a balanced approach to managing South Africa's economic challenges while at the same time aiming to foster growth and stability. By maintaining key tax rates and providing targeted investments in critical sectors, the government aims to navigate the complex economic landscape. For taxpayers, the message is clear: stability and careful planning are the themes of the year, with specific measures aimed at relieving pressure on both individuals and businesses. So if you’re looking to get a head start on your own budget, contact Booysen Accountants to start planning for the future today!