South Africa’s VAT (Value-Added Tax) rate was expected to rise from 15% to 15.5% starting 1 May 2025, as part of government efforts to boost revenue. This 0.5% increase, while seemingly small, would have had significant implications for consumers—especially in a climate of rising living costs.
However, following the controversy, the National Treasury issued a statement announcing a reversal of the VAT decision.
VAT (Value-Added Tax) is included in the price of most goods and services you pay for daily—from groceries to data plans, insurance admin fees, and entertainment. It’s invisible, but it adds up.
If the VAT hike had gone ahead:
The cost of most goods and services would have increased slightly.
A product currently costing R1,150 (VAT inclusive) would go up to R1,155.
Over time, this would add up — especially across your monthly bills and shopping basket.
VAT is a regressive tax, which means that it takes up a larger percentage of income from low earners than from those with higher earnings.
Let’s break it down:
If someone earning R5,000 spends R1,000 on taxable goods, that’s 20% of their income.
Someone earning R50,000 spending the same amount is only using 2% of their income.
So, while the VAT amount is the same in rands, it hurts lower-income households more, because they spend more of their income on basic, taxable goods.
This is why there are concerns about fairness, especially without additional support like increased social grants.
The debate around the hike highlighted these concerns—and likely influenced the decision to walk it back.
If the hike was implemented, these are some of the services and costs that would have been affected (and are worth understanding, regardless):
| Details | ||
|---|---|---|
| Cellphone & Data | ✅ Yes | Vodacom, MTN, Telkom, Rain — all VAT-inclusive |
| Fibre & Internet | ✅ Yes | ISPs will apply 15.5% VAT |
| Streaming Services | ✅ Yes | Netflix, Showmax, Spotify — VAT-inclusive subscriptions |
| Gym Memberships | ✅ Yes | Lifestyle services include VAT |
| Insurance Premiums | ❌ No | Premiums are VAT-exempt, but admin/service fees may rise |
| Medical Aid Contributions | ❌ No | Your monthly contributions to schemes like Discovery or Bonitas do not include VAT. |
| Loan Repayments (Home/Car) | ❌ No | Monthly repayments stay the same; admin fees might increase |
Existing credit purchases (pre-1 May): VAT was 15%, so your current monthly repayments remain unchanged.
New purchases (if the hike happened): The 15.5% rate would apply to new purchases, meaning slightly higher repayment amounts.
Even if VAT doesn’t rise this year, future increases are always a possibility, so it’s helpful to know how credit-related costs might shift.
Residential rent
Public education fees
Basic zero-rated foods (maize meal, bread, milk, eggs, fruits & vegetables)
Interest on home loans, car loans, and savings
Public transport fares (directly)
Even though the VAT increase is not happening, it’s still an important moment to:
Understand where VAT exists in your life
Reevaluate your expenses and where increases would hit hardest
Identify opportunities to reduce VAT-heavy consumption (like reducing takeaways or subscriptions)
Financial literacy moments like this give consumers a chance to prepare, not just react.
Even though the increase is not happening, here are a few smart things to do right now:
Review your monthly subscriptions—cut back where possible
Prioritise spending on essentials and VAT-exempt goods
Build (or grow) your emergency fund
Keep track of admin fees on loans, insurance, and services—these often rise quietly
While the VAT increase is no longer coming into effect in May 2025, this moment is a reminder of how quickly tax changes can impact our wallets. Whether you’re a student, a professional, or managing a household—knowing where your money goes gives you power, regardless of policy shifts.
In the meantime, this is a great time to get your budget sorted. Download our FREE budget planner here.