Budget 2025 hitting consumers where it hurts: in their pockets

Consumers who were hoping that Budget 2025 would bring some measures to relieve the financial pressure they live with were disappointed on Wednesday as the minister of finance had no rabbit under his hat to ease the cost-of-living crisis.

VAT increase of 0.5% in Budget 2025

Thabani Ndwandwe, chief risk officer at Standard Bank, says the increase in VAT from 15% to 15.5% was one of the most notable changes in Budget 2025, with another 0.5% increase coming in 2026. “For consumers, this means everyday goods and services will become more expensive.

While basic food items remain VAT-exempt and more items are zero-rated, the prices of many items will increase, adding further strain to household budgets. This increase will hit low- and middle-income earners the hardest, as VAT is a regressive tax, meaning it takes a bigger proportion of income from the poor than from the wealthy.”

JJ van Wyk, financial adviser at Momentum Financial Planning says for every R1 000 you spend on VATable goods, you will now pay an additional R5. “This is not a crippling amount for most South African households, but the implications of the additional revenue for the government are substantial.”

Roxanne Tobias, actuary and head of marketing and communications Sanlam Risk and Savings, says you will now, for the first time since 2018, pay 0.5% more for most goods and services, which could strain your household budget considerably.

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Personal income tax bracket freeze in Budget 2025

The bracket freeze means that we all pay more tax without a tax increase. While there is no direct increase in personal income tax rates, the government did not adjust tax brackets for inflation. This means that as your salary increases due to inflation, many South Africans will be pushed into higher tax brackets, which will effectively mean you pay more tax without actually earning more in real terms, Ndwandwe says.

Middle-class and working professionals will feel the impact the most as their take-home pay shrinks despite salary increases.

Tobias says 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, but this was not done this year.

“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.”

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One small relief in Budget 2025: an unchanged fuel levy

In a small win for motorists, the general fuel levy and the Road Accident Fund (RAF) levy will remain unchanged for another year, continuing the freeze introduced in 2022. This move provides around R4 billion in tax relief, preventing an even bigger fuel price hike, Ndwandwe says.

Tobias points out that this decision will keep fuel prices more stable and ease pressure on transport costs that affect groceries and services.

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This is how much more you will pay in sin taxes

Tobias says 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 government.”

If you drink or smoke, you can expect to pay more thanks to increased excise taxes in Budget 2025:

Alcohol duties increase by 6.75%:

• A 340ml beer will cost 16 cents more
• A 750 ml bottle of wine will cost 38 cents more
• A 750ml bottle of spirits (whisky, brandy, vodka) will cost R5.97 more
• A 750ml bottle of sparkling wine will cost 90 cents more
• A 340ml cider or fruit-flavoured alcoholic drink will cost 16 cents more.  

Tobacco duties increase by 4.75% and by 6.75% for cigars and pipe tobacco:

• A pack of 20 cigarettes will cost R1.04 more
• Cigarette tobacco will cost R1.16 more per 50g
• Pipe tobacco will cost 50 cents per 50g more
• Cigars will cost R8.49 per 23g more
• Vapes will cost 14 cents per millilitre more.

Ndwandwe says government justifies these increases as a public health measure while raising revenue, but it means consumers will pay even more.

ALSO READ: Budget 2025 VAT exemptions show Treasury’s disconnect with poor people

Small increases in social grants in Budget 2025

Nearly 28 million South Africans depend on grants and while grant payments will increase slightly, they may not keep up with food inflation, meaning beneficiaries will still struggle to afford essentials as prices continue to increase.

Public transport and infrastructure in Budget 2025

Government is allocating R19.2 billion to the Passenger Rail Agency of South Africa (Prasa) to improve train services, alongside an additional R11.8 billion for infrastructure projects. Ndwandwe says if these funds are managed efficiently, commuters could benefit from better, cheaper transport options.

“However, given past mismanagement of infrastructure budgets, accountability will be key to ensuring that South Africans see improvements.”

ALSO READ: Budget 2025: A game of give a little and take a lot?

Was Budget 2025 a responsible budget?

Van Wyk believes that Budget 2025 was responsible overall and that the VAT increase could be a good thing for South Africans.

“Considering the plans announced in Budget 2025 to improve infrastructure, this additional tax should provide more work opportunities for citizens, enabling them to travel further distances from outlying areas.

What was lacking in Budget 2025?

Van Wyk would have liked to see increases in contribution limits for tax-free savings accounts, pensions and retirement funds, as these changes would empower households to save more and alleviate financial pressure on consumers.