This year is hurtling along, and with a snap of two fingers, we find ourselves in March. With so much going on, one can be excused for not tuning into the Budget Speech delivered by Finance Minister Enoch Godongwana last week. The good news is that we’ve rolled it all up in a brief highlights package so you can stay informed, but not feel bogged down with too much detail.
“Now is not the time to increase taxes…we have decided to keep money in the pockets of South Africans.”
So, a balanced budget that looks to increase coffer revenues via sin tax, while making sure we don’t cough up too much more in the way of PAYE, seems fair.
Onto the detail. Let’s start with the threshold for paying personal income tax.
Last year, anyone earning less than R87 300 for the year paid no income tax. This year that ceiling has been raised to R91 250 for anyone younger than 65, R141 250 for anyone older than 65 but younger than 75, and R157 900 for anyone 75 and older.
Now let’s move on to the adjustments for all other taxpayers.
The 4 columns represented in the table below highlight the following information.
- The rate (%) at which your income gets taxed.
- Annual earnings band per annum for 2021.
- Annual earnings band per annum for 2022 (this new tax year starting from the 1st of March)
- The rand increase between the earnings band in 2021 and 2022.
Why is this table important? Let’s take a quick look at an example.
Thandi earns R18 000 per month (R216 000 per annum) and falls into the 18% tax bracket for 2021. But if she receives a 4% salary increase her new taxable salary will be R224 640 per annum and will shift her into a new tax bracket.
That’s not ideal, is it?
But because the range for 18% taxpayers has been increased to R226 000 per annum, Thandi will not be impacted by her salary increase this year. In other words, if in 2021 you fell into the 18% bracket, and in 2022 receive a R9 800 annual increase, you remain in the 18% tax bracket. This is the highlight of the budget speech for anyone heading off to work and putting in a solid shift every day.
|Rate of Tax||2021||2022||Rand Increase|
|18%||1 – 216 200||1 – 226 000||9 800|
|26%||216 201 – 337 800||226 000 – 353 100||15 300|
|31%||337 801 – 467 500||353 101 – 488 700||21 200|
|36%||467 501 – 613 600||488 701 – 641 400||27 800|
|39%||613 601 – 782 200||641 401 – 817 600||35 400|
|41%||782 201 – 1 656 600||817 601 – 1 731 600||75 000|
|45%||1 656 601 +||1 731 601 +||75 000 +|
The long and short of this is the following. Since the government increases the brackets at which we get taxed, more and more of our annual increases go into our pockets and not just towards paying more income tax.
Other encouraging news is:
For medical scheme members: The monthly tax credit increases from R332 for each of the first two persons and R224 for every additional person in 2021, to R347 and R234 in 2022. No mention was made of National Health Insurance either.
For business owners in 2023: The corporate income tax rate will drop from 28% to 27% on the 31st of March 2023. This is always welcome but still has some way to go before meeting the average worldwide corporate tax rate of 23.54%.
The fuel levy: No increases in the general fuel levy nor the road accident fund levy. Mention was also made that all aspects of the fuel price need to be reviewed and that government has a team working on it.
Is there any bad news?
Well, that depends on whether you smoke, drink alcohol, enjoy sugar in your tea, use plastic bags, or intend buying a car.
- A 340ml can of beer will cost 11 cents more
- A 750ml bottle of wine will cost 17 cents more
- A bottle of sparkling wine will cost 76 cents more
- Your favourite whisky will be R4 83 more expensive than before
- Cigarettes will cost an extra R1. 03 per packet, and no, switching to vaping won’t work either. At least, from next year January, it won’t.
- From January 2023, the government plans on introducing a new tax on vaping products – R2.90 per ml.
- For those with a sweet tooth, the health promotion levy on sugar will increase to 2.31 cents per gram of sugar, so maybe it’s time to cut back on that second cup of coffee every morning?
- And if you keep forgetting to bring your shopping bags – the plastic bag levy increases from 25 cents to 28 cents as of the 1st of April 2022.
- And while the fuel levies are not increasing, the carbon fuel levy certainly is. This increases by 1 cent. From the 6th of April 2022, it becomes 9 cents per litre for petrol and 10 cents per litre for diesel.
And that wraps up the 2022 budget speech. Every taxpayer stands to benefit from the increased tax brackets which will in some way compensate for the increase in sin taxes.
We, therefore, wish you a financially blessed 2022!
We would love to hear your comments. Feel free to leave them on this post.
Until next time. The Wise About Life Team