VAT has been increased. What you can expect

The South African government has announced an incremental increase in Value Added Tax (VAT) which was initially tabled, then postponed and now been put into law with the support of the ANC and Action SA. Finance Minister Enoch Godongwana proposed the incremental increase over a period of a year to achieve an ultimate 1% increase on Value added tax. But to phase it in with a 0.5% increase this year and then the other 0.5% increase next year.

Vat is applied on the majority of goods and services in South Africa.

What You Need to Know About the VAT Increase

As part of the 2025 budget, the South African government will increase VAT from 15% to 15.5% on 1 May 2025. A further 0.5% increase will take effect on 1 April 2026, bringing the total VAT rate to 16%. This move aims to generate additional revenue for essential services such as healthcare and infrastructure but will have a direct impact on everyday expenses.

The Bigger Picture: How VAT Will Impact Everyday Expenses

The VAT increase will not only affect insurance but also the cost of daily essentials such as:

Groceries and household goods – Although there are VAT exempt items to assist South Africans, those items will be ore expensive due to the supply chain costs which behind the scenes attract VAT at the new levels and in production. Click here for a list

Municipal rates and taxes – Increased service costs for electricity, water, and refuse collection. Medical expenses – Private healthcare costs and medical aid contributions may also rise.

Fuel and transport – VAT applies to many transport-related expenses, affecting daily commutes and logistics. Which means fares will increase, and also the transportation of goods and products across south Africa, which includes everything from vehicles to food to outlets.

While the government has suggested expanding VAT zero-rated items to lessen the burden on low-income households, South Africans should still prepare for a general rise in expenses.

How Will This Affect Insurance Premiums?

Insurance premiums are subject to VAT, meaning that any increase in VAT will result in higher costs for policyholders. Here’s how it breaks down:

• If your current insurance premium is R1,000, the VAT at 15% is R150, making your total premium R1,150.

• When VAT increases to 15.5%, the VAT portion will rise to R155, making your new total premium R1,155.

• When VAT reaches 16% in April 2026, the VAT portion will be R160, increasing your premium further.

This increase will apply to life insurance, car insurance, home insurance, and other financial services, making it important to review your policies and plan ahead.

What Can You Do to Prepare?

1️⃣ Review Your Insurance Portfolio – Ensure you have the right coverage at the best price. Speak to your broker about possible adjustments or bundled policy discounts.

2️⃣ Adjust Your Budget – Factor in higher costs when planning monthly expenses to avoid financial strain.

3️⃣ Maximize Tax Benefits – Consider tax-efficient savings like Retirement Annuities (RAs) and Tax-Free Savings Accounts (TFSAs) to protect your wealth.

4️⃣ Explore Cost-Saving Options – Look for ways to reduce discretionary spending to absorb increased living costs.

We’re Here to Help You Navigate These Changes

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