Understanding the effect of ‘no adjustment to rate table’

Understanding the effect of ‘no adjustment to rate table’

By: Geraldene Göldner
Senior manager: Tax

In the recent Budget Speech, the Minister of Finance made it clear that there will be no adjustment to the tax brackets, rebates, and medical tax credits applicable to individual taxpayers.  But what does this mean for you?  Does it imply that you will not be worse off, come 1 March 2024?   

At first glance, one might assume that since there are no adjustments, one’s personal income tax remains unaffected by the Budget Speech. However, this assumption overlooks the reality of living in an inflationary environment.  The true impact of no “inflationary adjustments”, becomes clear with a practical example:

Consider Jamie, a 45-year-old consultant who earned a gross salary of R 500,000 during the 2024 tax year.  Jamie spent R 390,000 on living expenses during that period.  Let’s assume Jamie receives an inflationary salary increase of 5.9% on 1 March 2024, aligning with the rise in Jamie’s cost of living.  What will the effect be on Jamie’s financial position for the year?

From these calculations, it becomes apparent that despite receiving an annual salary increase of R 29,500 in the 2025 tax year, Jamie’s surplus for 2025 will be less than in 2024.  Consequently, Jamie’s financial position will deteriorate year-on-year.

Therefore, while the ‘no adjustment’ may seem inconsequential at first glance, the reality is that it will result in a worsened financial position for individuals like Jamie.