As always, there was much hype and anticipation ahead of Finance Minister Tito Mboweni’s 2021 budget speech. The economic crisis, COVID, rampant corruption, and failing state owned enterprises. What would he do? Where will the money come from? More tax?
Well, here are the highlights of the 2021 budget speech that relate to us “ordinary” citizens. The main areas of concern for individuals are usually the fuel levy, “sin” taxes, personal taxes and social grants. Although there was some talk of a wealth tax or once-off “covid” type tax to fund the impact of the pandemic, these did not materialise. Let’s see what the changes are.
Download the handy Budget 2021 Tax Guide here.
Individual Income Tax
The Income Tax brackets for Pay As You Earn (PAYE) have been increased, and the percentages of PAYE remains unchanged. This means that we will all pay slightly less tax, with lower income earners seeing greater benefit. The tax rebates have also increased a little.
You can use these tables to work out your own tax. These are based on annual income though and we will just look at a simple calculation. Ignore benefits, deductions and interesting tax benefits for now.
If you earn R30k per month, or R360k per year, you are in the 31% tax bracket.
Tax in the 2020 tax year
Your current tax for the whole of the 2020 tax year would be:
R67,114 + (31% of R38,400) = R79,048
Less the rebate of R14,958
= R64,090 tax for the year, or R5,340.83 tax per month
Tax in the 2021 tax year
However, with the new tax brackets an increased rebates, the situation is:
R70,532 + (31% of R22,200) = R77,414
Less the rebate of R15,714
= R61,700 tax for the year, or R5,141.67 tax per month
Thus R200 per month less tax. You can find the tax tables on the SARS website.
PS – you may be interested in how the Medical Tax Credits work.
As usual, there’s an increase in the Fuel Levy. This is an easy and predictable tax and means that fuel is more expensive. And that means that everything we buy becomes more expensive as it all needs to be transported somehow.
The increases total 27c for every litre of petrol. This will bring the total taxes to R6.15 per litre of petrol. That’s a lot of tax per litre!
The tax per litre of fuel is broken down as follows:
- R3.85 (petrol) and R3.70 (diesel) for the general fuel levy
- 8c (petrol) and 9c (diesel) Carbon tax
- R2.18 for the Road Accident Fund
- 4c for customs and excise taxes
Work out how this may affect your budget and take a look at how to deal with the increasing fuel price.
The so-called “sin” taxes are another easy target to be increased each year and the question is simply by how much. Sin taxes refer to the taxes that we pay for drinking and smoking. Whether they’re a “sin” or not is a matter of opinion, but it’s the common label given to them.
We already pay a lot for these, but here are the increases.
- 340ml can of beer or cider will cost an extra 14c;
- A 750ml bottle of wine will cost an extra 26c;
- A 750ml bottle of sparkling wine an extra 86c;
- A bottle of 750ml spirits, including whisky, gin or vodka, will increase by R5.50;
- A packet of 20 cigarettes will be an extra R1.39c;
- 25 grams of piped tobacco will cost an extra 47c, and;
- A 23 gram cigar will be R7.71 more expensive.
You may not care about social grants right now, but I bet that you know someone who relies on them. My parents for example rely heavily on the state pension and I know how tough it is. They are both over 75 so receive R1,880 per month and are expected to somehow cover rent, groceries, and all basic needs. It’s a scary thought. That’s R3,760 as a couple.
So what increase did they get now? A whopping R30! That’s like apie and packet of chips. But really, what can one do with that?
It’s literally nothing but I suspect it’s because of the additional R350 benefit that was extended during this time. Else who knows why the increase would be so tiny.
So let me not scare you now, but will you be able to retire? How much will you need to retire? Do you have a plan?
Perhaps you should speak to a financial planner about your finances?
So how does the 2021 budget speech affect you?
To be honest, if you’re a working individual under the age of 65, you won’t see all that much difference. You will pay a little less PAYE each month, but fuel, sin taxes and general consumer goods will all go up in price.
Hopefully you’re lucky enough to get an increase in salary, but the reality is that most companies can’t afford this. So in that sense you will feel that you have less money as costs increase and income remains the same.
You need to find creative ways to live within your means. So either by reducing expenses, or increasing earnings.
No easy answers, but start with your budget! If you don’t have one… here’s the Budgeting 101 series!