LEGAL NOTE: MARCH 2025 - BUDGET SPEECH 2025/26 TAX YEAR
- Anu Ananmalay
- Mar 26
- 5 min read
The Finance Minister Mr. Enoch Godongwana delivered the Budget Speech on the 12 March 2025. Below are some of the important tax implications from the 2025 Budget Speech.
INDIVIDUALS
There are no changes to the rates of tax and rebates. The maximum marginal rate for natural persons remains at 45% and is reached when taxable income exceeds R1,817,001.
The minimum tax rate remains at 18% on taxable income not exceeding R237,100.
The primary rebate for all natural persons remains at R17,235. The additional rebate for persons aged 65 years and older remains at R9,444. Persons aged 75 and older are granted a further R3,145 as before.
The tax-free portion of interest income remains at R23,800 for taxpayers under 65 years and R34,500 for persons aged 65 years and older. In addition, the tax-free savings dispensation for other approved investments, including collective investment schemes, remains at R36,000 per tax year.
Local dividends tax remains at a flat 20% rate, which was effective 22 February 2017.
Foreign dividends also remain effectively taxed at a flat rate of 20%, but this may be reduced in terms of Double Tax Treaties.
A final withholding tax on interest from an SA source to a non-resident remains at 15%, subject to Double Tax Treaties.
An individual is exempt from the payment of provisional tax if the individual does not carry on any business and the individual’s taxable income –
Will not exceed the tax threshold (see 4 below) for the tax year, or
From interest, foreign dividends and rental will be R30,000 or less for the tax year.
The Section 10(1)(o)(ii) exemption for foreign employment income of tax residents remains at R1.25 million, effective 1 March 2020.
COMPANIES AND CLOSE CORPORATIONS
The normal tax rate remains at 27% (reduced from 28% to 27% for tax years commencing 1 April 2022 or put another way, ending on or after 31 March 2023).
The final withholding dividends tax remains at a flat rate of 20%.
Tax-exempt recipient bodies (e.g. Retirement Funds) will suffer no dividend withholding tax upon production of a tax-exemption certificate.
TRUSTS
The flat rate remains at 45%, although distributions in the same tax year to SA resident beneficiaries are taxed in the beneficiaries’ hands.
INDIVIDUAL TAX THRESHOLDS
Liability for tax is as follows:
Under 65 years: | R95,750 |
65 to 74 years: | R148,217 |
75 years and older: | 165,689 |
INCOME TAX: INDIVIDUALS AND SPECIAL TRUSTS
Taxable income (R) | Rates of tax |
1 – 237,100 | 18% of taxable income |
237,101 – 375,500 | R42,678 + 26% of taxable income above R237,100 |
370,501 – 512,800 | R77,362 + 31% of taxable income above R370,500 |
512,801 – 673,000 | R121,475 + 36% of taxable income above R512,800 |
673,001 – 857,900 | R179,147 + 39% of taxable income above R673,000 |
857,901 – 1,817,000 | R251,258 + 41% of taxable income above R857,900 |
1,817,001 and above | R644,489 + 45% of taxable income above R1,817,000 |
TRUSTS OTHER THAN SPECIAL TRUSTS – RATE OF TAX – 45%
TAX REBATES:
Primary | R17,235 |
Secondary (Age 65 and over) | R9,444 |
Plus (Age 75 and over) | R3,145 |
ESTATE DUTY AND DONATIONS TAX
The estate duty and donations tax rate remains 20% for dutiable estate amounts of R30 million or less, and increases to 25% for dutiable estate amounts over R30 million.
The estate duty abatement (exempt threshold) remains at R3,5 million per person, and a surviving spouse may also benefit automatically from any unused deduction in the first-dying spouse’s estate, i.e., the abatement remains a combined maximum of R7 million for the second-dying spouse.
There is a similar treatment of Donations Tax, namely, 20% for donations of R30 million or less, which increases to 25% for donations over R30 million, being the cumulative value of all donations on or after 1 March 2018.
The first R100,000 donated in each tax year by a natural person remains exempt from donations tax. Donations between spouses are fully exempt.
CAPITAL GAINS TAX (CGT)
The annual capital gain exclusion for individuals remains at R40,000.
The primary residence exclusion from capital gains tax remains at R2 million.
The capital gain exclusion at death remains at R300,000.
The effective rate of CGT ranges from 7.2% to 18% for individuals, 21.6% for companies and 36% for Trusts, although correctly structured Trusts can result in the lower individual beneficiary rate being applicable.
TRANSFER DUTY
Effective 1 April 2025, the thresholds are concessionally revised:
Property Cost | Duty Fees |
0 - 1,210,000 | 0% |
1,210,001 - 1,663,800 | 3% |
1,663,801 - 2,329,300 | 6% |
2,329,301 - 2,994,800 | 8% |
2,994,801 - 13,310 million | 11% |
13,311 million and above | 13% |
RETIREMENT FUNDS (The revised tables are as below)
Retirement Fund Lump Sum Withdrawal Benefits
Taxable Income | Rates of Tax |
0 – 27,500 | 0% of taxable income |
27,501 – 726,000 | 18% of taxable income above 27,500 |
726,001 – 1,089,000 | 125,730 + 27% of taxable income above 726,000 |
1,089,001 and above | 223,740 + 36% of taxable income above 1,089,000 |
Retirement Fund Lump Sum Retirement Benefits or Severance benefits
Taxable Income | Rates of Tax |
0 – 550,000 | 0% of taxable income |
550,001 – 770,000 | 18% of taxable income above 550,000 |
770,001 – 1,155,000 | 39,600 + 27% of taxable income above 770,000 |
1,155,001 and above | 143 550 + 36% of taxable income above 1,155,000 |
Tax Harmonisation of Retirement Fund Contributions
As of 1 March 2016, all retirement funds (pension, provident and retirement annuity funds) are treated similarly for tax contribution purposes.
The tax deduction formula of 27.5% per annum (with a cap of R350,000) of the greater of taxable income and remuneration applies to members of all retirement funds, including provident funds.
Annuitisation
Pension and Retirement Annuity (RA) Funds require a compulsory annuity purchase upon retirement with two-thirds of such Fund benefits value, while Provident Fund benefits value as of 1 March 2021 may be commuted in full, after which the annuitisation principle also applies to such subsequent contributions and growth thereon. The threshold below which a full fund benefit from a Pension, Provident or RA is allowed to be commuted is R247,500.
“Two-Pot” Retirement System
This was implemented on 1 September 2024 and allows retirement fund members limited annual access to the savings pot element of their retirement fund benefit value. The benefit payable is subject to the member’s marginal tax rate.
MEDICAL EXPENSES
Taxpayers may, in determining tax payable, deduct monthly contributions to medical schemes (a tax rebate to be known as a medical scheme fees tax credit) up to R364 for each of the taxpayers and the first dependant on the medical scheme and R246 for each additional dependant.
An individual who is 65 and older, or if that person, their spouse or child is a person with a disability, 33.3% of qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed three times the medical scheme fees tax credits for the tax year.
Any other individual, 25% of an amount equal to qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed four times the medical scheme fees tax credits for the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).
VAT
The rate increases to 15.5% effective 1 May 2025 and to 16% effective 1 April 2026. The compulsory VAT registration threshold remains at R1 million turnover per twelve-month period.
FOREIGN EXCHANGE
The offshore investment allowance remains at R10 million per adult person per calendar year. In addition, the R1 million individual single discretionary allowance remains.
VOLUNTARY DISCLOSURE PROGRAM
Taxpayers with undisclosed income, whether local or foreign, may avail themselves of the permanent normal SARS Voluntary Disclosure Programme (VDP) contained in the Tax Administration Act to mitigate penalties.
Regarding unauthorised foreign assets, a person may approach the SA Reserve Bank (SARB) for regularisation, and each case is considered on its own merits.