No VAT Hike, No Austerity—What the Reworked May 2025 Budget Means for You
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After March’s budget was tabled and promptly rejected, the big sticking point was a proposed VAT increase. That idea is officially scrapped. Instead, budget 3.0 lands with a lighter touch, but heavier debt. It's leaner, politically safer, but still demands your sharpest calculator. Below is a summary of the key highlights of the new budget that will impact your work.
What's New in Budget 3.0?
Finance Minister Enoch Godongwana’s latest budget, now widely backed and set to pass, avoids austerity while juggling a trimmed spending plan and muted revenue growth.
VAT stays at 15%
This alone avoids passing costs to clients, which many accountants flagged as a significant concern.
Fuel Levy Rises for First Time in 3 Years
Starting 4 June 2025:
Petrol: Up by 16c to R4.01/litre
Diesel: Up by 15c to R3.85/litre
Expect downstream cost increases. For accountants, this will affect budgeting, tax planning, and forecasts, especially in logistics and transport-heavy industries.
No Inflationary Changes to Tax Brackets or Medical Credits
The bracket creep remains, which means more tax is collected without changing rates. The result is that taxpayers earning the same in nominal terms will owe more tax, something they should flag early.
SARS Gets a Budget Bump
The tax collector is getting an extra R7.5 billion to improve collections and reduce the debt backlog. This could mean more aggressive collections, which practitioners should prepare clients for.
SARS is getting a significant budget boost over the next three years, signaling a clear ramp-up in the government’s tax collection drive. This means businesses and individuals can expect more frequent and targeted audits, stricter enforcement, and fewer delays in collection activities. For accountants, this translates to a greater need for airtight compliance, timely submissions, and proactive client education, especially for those in higher-risk industries or with complex tax profiles. The message is simple: SARS is sharpening its tools and coming to collect.
Debt Hits Record High—77.4% of GDP
South Africa’s public debt will hit its highest post-democracy level. Debt-service costs now eat 22 cents of every tax rand, rising to R426.3 billion this year.
Budget Deficit Shrinks Slightly
The deficit improves modestly, forecast at 4.6% of GDP for 2025/26, but only due to spending restraint, not revenue booms.
Spending Growth Slowed—Not Slashed
Spending is planned to still grow by 5.4% to R2.81 trillion in 2027/28, but that’s R200 billion less than March’s draft. Departments keep most of their allocations, with frontline services largely protected to ensure service delivery.
How SARS Plans to Meet the Target?
SARS has acknowledged the tough economic climate—but it’s not backing down from its mission. With a revised revenue target of R1.986 trillion for 2025/26, the tax authority has pledged to intensify efforts to close the tax gap and fund essential public services. How are they going about it? Let’s see what they plan to do.
Increased debt collection drive
Renewed focus on recovering undisputed tax debt.
Goal: Minimum R20 billion from debt collections alone.
Over 800 new employees have been recruited and trained to support this effort.
Advanced analytics & AI
Leveraging third-party data (e.g., banking, payroll) to detect underreporting and boost compliance.
Increased automation of tax assessments and flagging of discrepancies.
Combating the illicit economy
Cracking down on smuggling and counterfeit operations in tobacco, alcohol, and fuel sectors.
Aim: recover lost revenue and deter repeat offenders.
Broadening the tax base
Identifying unregistered individuals and businesses, particularly in informal and hard-to-tax sectors.
Expanding registration efforts to reduce dependence on a narrow taxpayer base.
“SARS must do more to realise a better life for all South Africans. We play a catalytic role in funding 90% of government expenditure—including pensions, healthcare, and social services. To the compliant taxpayers: Ndza khenza. Your contribution builds our nation.”
How Will This Impact You?
Budget 3.0 is a political recovery mission with financial consequences. For accountants, it calls for stepping up forecasting, advisory, and client communications.
For Accountants in Practice
Expect more client queries about personal tax increases due to the bracket creep from unchanged PIT thresholds.
Stay alert on SARS enforcement, more budget allocations to the tax authority suggest a focus on boosting collections.
Expect more audits and compliance checks—especially for clients in high-risk or cash-heavy industries.
Prepare clients for proactive disclosure, cleaner books, and potential queries from SARS.
Stay informed—data-driven enforcement is on the rise, and SARS is ready to act.
Adjust advisory for cost impacts from fuel, excise duties, and squeezed margins.
For Accountants in Commerce
Flag rising debt-service costs and slower GDP growth (1.4% in 2025) in boardrooms.
Use the budget narrative to push for stronger compliance systems and financial risk assessments.
Track client and internal project budgets—higher input costs from fuel and interest will bite. Use the budget’s focus on efficiency as ammo to champion cost-saving and compliance investments.
Bracket creep and excise increases subtly shift the tax burden—watch the impact on payroll and HR strategies.
Quick Stats to Know
Debt-to-GDP: 77.4% in 2025/26
Deficit: 4.6% of GDP
SARS Revenue Dip: Gross tax revenue projections cut by R61.9 billion over MTEF
GDP Growth Forecast: 1.4% in 2025
Personal Tax Threshold: Unchanged at R95,750
Want to Know More?
These are the sources we recommend for you:
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