Why the Budget Speech Matters to You
Finance Minister, Enoch Godongwana, delivered this year's updated Budget Speech on 21 May 2025, presenting a revised budget subject to Parliamentary approval. This speech brought some significant changes from earlier proposals, particularly concerning VAT and the general fuel levy. Knowing how the latest Budget Speech affects you, will give you the power to take control of your finances, relook your financial plan, and have confidence in your financial future.
Roxanne Tobias, Actuary and Head: Marketing & Communications Sanlam Risk & Savings, says, “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.”
Here, Roxanne shares her Budget Speech insights and how it will influence your budget:
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 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 Government has less money to spend. This year’s Budget Speech notes that South Africa’s real GDP is now estimated to grow at 1.4% in 2025, with moderate increases to 1.6% in 2026 and 1.8% in 2027. This slower growth makes it challenging for 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 Government gets its money from, and an expenses section, referring to how Government will spend this money. The Minister highlighted that debt service costs remain high, amounting to around R1.2 billion per day in 2025/26 to service the country’s debt – more than what is spent on frontline services like health, police, and basic education.
Roxanne says, “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, Government needs to manage its debt levels and how it will be able to repay this debt over the medium term. The Minister was clear that this budget supports sustainable finances, the social wage, and investments in economic growth, emphasising the difficult trade-offs needed to balance fiscal sustainability while addressing developmental goals.”
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, which 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, resulting in an increase in 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.
Roxanne comments, “It's crucial for taxpayers to understand that with no adjustments to personal income tax brackets for the second year running, any inflationary salary increase could push them into a higher tax bracket. This 'bracket creep' effectively means a higher tax burden for some, potentially reducing their expected take-home pay.”
Value added tax (VAT)
VAT is a consumption tax placed on the value added at every stage of a product’s production and distribution. The Minister announced that the proposed increase in the VAT rate has been dropped. VAT will therefore remain at 15%.
Roxanne explains, “The Minister’s announcement that VAT will remain at 15% is a significant update from previous proposals and reflects a responsiveness to public and political feedback. While this avoids a direct hike in the cost of many goods and services, it's important to note that the planned expansion of the zero-rated basket, which would have cushioned some households, will not proceed as a result.”
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 Minister announced that to help close the fiscal gap, there will be an inflation-linked increase to the general fuel levy from 4 June 2025. This means an increase of 16 cents per litre for petrol and 15 cents per litre for diesel.
Roxanne notes, “The inflation-linked increase to the general fuel levy is the only new tax proposal announced in this updated budget. While this is the first such increase in three years, it will undoubtedly add to transport costs and potentially have a knock-on effect on the price of goods, something South Africans need to factor into their monthly spending.”
How will the 2025 Budget Speech affect us over the long term?
The Budget Speech is not all about tax. The Minister stressed a fiscal strategy aimed at stabilising debt. Roxanne adds, “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 cannot afford to retire comfortably. This year, again, there are no changes to the tax rates on withdrawal or other retirement benefits and no changes to the R350,000 cap on the tax-deductible contribution to a retirement fund.
How do you make the Budget Speech work for you?
Roxanne emphasises, “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. We also have free budget calculators and tools to assess the impact on your wallet, so you can feel financially confident throughout 2025.”
Visit Sanlam’s website for real talk on the Budget Speech.