Here is how the non-adjustment of personal income tax will hurt the working class

Finance Minister Enoch Godongwana announced during his 2025 budget speech that there will be no adjustment to personal income tax brackets.

John Taylor, Head of Employee Benefits Consulting at Liberty Corporate Benefits says this will hurt the working class, because they effectively face a tax increase when the personal income tax brackets are not adjusted to keep up with the rising cost of living.

“This means that as prices go up and workers get small salary increases just to keep pace with inflation, more of their income may fall into higher tax brackets.”

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How will tax increase when there is no adjustment

Taylor says even if a person is not earning much more in terms of what they can buy, a salary increase that matches inflation might push them into a higher tax bracket. This is called the bracket creep.

“It means you end up paying a larger percentage of your income in taxes, even though your actual buying power hasn’t significantly improved.”

Only 7.8 million people in South Africa earn enough to pay personal income tax. Thus, the burden of this hidden tax increase will fall on a relatively small group of working individuals.

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Taxpayers are not getting relief

He adds that an earlier version of the budget had even proposed giving taxpayers some relief from this bracket creep.

“However, the current decision not to adjust the tax brackets will mean that salaried employees will feel even more pressure on their already stretched budgets as the cost of everyday items continues to rise.”

Thabani Ndwandwe, chief risk officer at Standard Bank, said the middle-class and working professionals will feel the impact the most as their take-home pay shrinks despite salary increases.

Personal tax reviewed annually

Roxanne Tobias, actuary and head of marketing and communications at Sanlam Risk and Savings, says he 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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