Standard Bank Highlights Hidden Tax Pressure Ahead Of National Budget

Source: Reuters. South African Finance Minister Enoch Godongwana.

Although personal income tax rates have not been raised, the failure to adjust tax brackets for inflation in 2024 and 2025 has effectively increased the burden on taxpayers. This so-called bracket creep has quietly eroded disposable income, leaving many South Africans hoping the upcoming budget will provide meaningful relief.

“Bracket creep occurs when your salary increases due to inflation, but tax brackets are not adjusted accordingly. As a result, taxpayers can find themselves paying more tax even though their real buying power has not improved,” explains Emile Du Plessis, head of Economic and Behavioural Analytics at Standard Bank Personal and Private Banking.

Because South Africa operates a progressive tax system, even inflation-linked salary adjustments can push salaries workers into higher tax brackets. This increases the proportion of income tax paid to the South African Revenue Service (Sars). Historically, the National Treasury adjusted tax brackets to neutralise this effect. The absence of such adjustments over consecutive years is likely to have put significant pressure in some households’ finances.

“After two years of bracket creep, taxpayers might be hoping that the 2026 Budget will finally include meaningful inflation adjustments. If the Budget again makes no adjustments, households will need to reassess their spending and trim costs, especially as many living expenses are rising faster than inflation,” adds Du Plessis.

Another pressure point is medical tax credits, which have remained unchanged since the 2023 Budget. At the same time, medical-aid premiums and out-of-pocket healthcare costs have continued to rise.

What else should consumers watch for?

Beyond personal income tax, the 2026 Budget may also signal how government plans to manage broader household cost pressures. Consumers should pay close attention to:

• Indirect taxes, such as fuel levies and sin taxes
• Vat changes, including whether zero-rated food items will be expanded to ease food inflation
• Relief for middle-income earners, who often fall outside of social support but bear the brunt of rising taxes
• Government debt servicing costs as constrained government finances may limit the scope for broad-based tax cuts.