Bracket Creep Explained, The Quiet Tax That's Shrinking Your Wallet

South Africans could be feeling the pinch in 2025, even if they receive a salary increase, due to a hidden tax hike known as 'bracket creep.'

Despite an absence of formal tax rate hikes, the government's budget changes are pushing more workers into higher tax brackets, reducing their take-home pay, as the Daily Investor reports.

Carla Rossouw, tax expert and head of tax at Allan Gray, highlighted this issue, explaining that the Treasury's decision to keep personal income tax brackets and rebates unchanged for the 2025/26 tax year means many earners, particularly in the lower to middle-income brackets, will be hit by higher taxes. Rossouw described this as a 'stealth tax' because, while official tax rates have not increased, inflation-driven salary hikes push workers into higher tax brackets, effectively raising their tax burden.

This year's budget does not offer the relief that many had hoped for, leaving the lower and middle-income groups to bear the brunt. In contrast, last year's budget had proposed partial relief, which would have adjusted tax brackets in line with inflation, helping offset the impact of a two-percentage-point VAT hike . However, that proposal was not included in the 2025/26 budget.

To add to the burden, the government is also increasing VAT by 0.5 over two years, with the rate expected to rise to 16 by April 2026. This increase passed through the National Assembly on 2 April 2025, after a heated vote.