Consumers continue to feel the devastating effects due to a strained economy brought about by the COVID-19 pandemic. South Africa's upcoming National Budget address for 2021 ย is a good time to reflect on the state of your finances and a better plan for the year ahead.

The National Budget is based on the government's planned spending for the new financial year and outlines the governmentโ€™s priorities; just like a person needs a budget and a spending plan the government needs one as well. This helps them allocate the income they receive from taxes to the areas they need to spend on like education and hospitals. The biggest implication the budget has on the general public is the change in personal income tax, fuel levies, and sin taxes.

The government of South Africa does a budget on an annual basis and as a consumer, it is critical to reassess your current spending and behavior as well. It is also important to make sure you understand where your money is going and if you are spending on the things that are important to you. ย โ€“ or, if you donโ€™t know-how, educate yourself to help you plan for the future, pay off existing debt or even save for other things you want to accomplish this year.

As FNB South Africa, we recently launched an innovative smart budgeting tool for customers, located under the navยป Money functionality on the FNB App. The new smart budget tool uses the bank's dynamic data capability to create a level of accountability and real-time coaching that has not been provided before. FNB customers can take control of their spending, set budget limits, and get notified; when they are halfway there, just before they get there, and once they have hit their budget amount.

Below are key elements to consider from the budget speech by Tito Mboweni, South Africa's Minister of Finance.

How does the budget speech affect me?

The impact on my budget

  • Changes to personal income tax might reduce or increase the amount you receive on monthly basis;
  • Taxes imposed on liquor, tobacco, and fuel will have a big effect depending on how much of your budget is spent on these items.

Impact on Investments

  • Increase in Tax Free Savings Account limit to allow for more saving, if the limit is increased

Understanding the different taxes

  • VAT โ€“ VAT is now levied at the standard rate of 15% on the supply of goods and services by registered vendors. The tax rate was 14% until 31 March 2018. A vendor making taxable supplies of more than R1 million per annum must register for VAT.
  • Personal Income Tax - Taxable income is the amount of a person's gross income that the government deems subject to taxes. Taxable income consists of both earned and unearned income. Taxable income is generally less than gross income, having been reduced by deductions and exemptions allowed by the IRS for the tax year.
  • Dividends Tax - Dividends tax is a final tax on dividends at a rate of 20%, paid by resident companies and non-resident companies in respect of shares listed on the JSE. Dividends are tax-exempt if the beneficial owner of the dividend is a South African company, retirement fund or another exempt person
  • Capital Gains Tax - Capital gains tax (CGT) is part of income tax. It is triggered when you make a profit from selling something you own (an asset). The tax is calculated on the profit you make and not the amount you sold it for.

In light of the highly uncertain economic environment, it has never been more important for consumers to pay special attention to the National Budget Speech, as key decisions made by the Minister will impact on their growth and survival.

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