Thanks to the budget, if you're a higher earner you will be paying more income tax

by Julie Brownlee, FSP Invest, 20 March 2015

The budget address at the end of last month revealed some news that higher earners didn't want to hear. Personal income tax is rising if you earn more than R181,900 a year.

So what does this mean for you?

Let's take a closer look…


Personal income tax rises 1% if you earn more than R181,900 a year


During his first full budget speech, the finance minister Nhlanhla Nene said that “personal income tax will go up by 1% for all salaries above R181,900 a year,” reports IOL.

Mr Nene said that the increase would have the following effect, if you’re under 65, says Times Live:

  • If you earn R200,000 a year, your income tax contribution will rise R21 a month.
  • If you earn R500,000 a year, your income tax contribution will rise R271 a month.
  • If you earn R1.5 million a year, your income tax contribution will rise R1,105 a month.

If you’re earning R1.5 million a year, that’s an additional R13,260 a year in tax.

Karen Botha, a senior tax manager at PwC, said with “11% of registered taxpayers bringing in 61% of the total personal income payable in SA… the lower income earners get to take more home on a monthly basis,” reports BDLive. She’s unsure “how much longer the 11% will tolerate this”.


Personal income tax is the government’s top revenue generator


For the 2015/2016 tax year, personal income tax “will account for 36.4% of overall tax revenue,” says MoneyWeb. Coming a close second is VAT, due to account for 26.2% of all tax revenue.

Hikes to personal income tax were expected as the government is seeing “corporate tax revenue under pressure amidst dwindling economic growth,” adds MoneyWeb.

Tax on trusts is also rising 1% in line with personal income tax, says BizNews. The tax-free threshold for those under 65 “will increase from R70,700 to R73,650”.

So the more you earn, the more you will be paying in income tax as the government targets higher earners for additional revenue.

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Thanks to the budget, if you're a higher earner you will be paying more income tax
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