In 2025, South Africans have several opportunities to reduce their tax liabilities through various deductions and incentives. Understanding these can lead to significant savings.
1. Individual Tax Rates and Rebates
The South African Revenue Service (SARS) has structured tax rates progressively for the 2025 tax year:
-
Taxable Income up to R237,100: Taxed at 18%.
-
R237,101 – R370,500: R42,678 plus 26% of the amount above R237,100.
-
R370,501 – R512,800: R77,362 plus 31% of the amount above R370,500.
-
R512,801 – R673,000: R121,475 plus 36% of the amount above R512,800.
-
R673,001 – R857,900: R179,147 plus 39% of the amount above R673,000.
-
R857,901 – R1,817,000: R251,258 plus 41% of the amount above R857,900.
-
Above R1,817,000: R644,489 plus 45% of the amount above R1,817,000.
Tax rebates for individuals under 65 are R16,425; for those aged 65 to 74, an additional R9,000; and for those 75 and older, an extra R2,997.
2. Retirement Fund Contributions
Contributions to pension, provident, and retirement annuity funds are tax-deductible. The deduction is limited to the lesser of:
-
27.5% of the greater of remuneration or taxable income, or
-
R350,000 annually.
Maximizing contributions can substantially reduce taxable income.
3. Medical Expense Deductions
Medical scheme contributions and out-of-pocket medical expenses offer tax credits:
-
Medical Scheme Fees Tax Credit (MTC): R364 per month for the first two beneficiaries, and R246 for each additional beneficiary.
-
Additional Medical Expenses Tax Credit (AMTC): Calculated based on age, disability status, and medical expenses exceeding certain thresholds.
4. Section 12B: Renewable Energy Investments
Investments in renewable energy projects qualify for a 125% tax deduction if completed between March 1, 2023, and February 28, 2025. This incentive encourages sustainable practices and offers substantial tax relief.
5. Section 12J: Venture Capital Investments
While Section 12J, which provided deductions for investments in approved venture capital companies, was repealed in 2021, existing investments made before the repeal may still offer benefits. Consult a tax advisor to understand potential deductions.
6. Home Office Expenses
With the rise of remote work, qualifying individuals can deduct certain home office expenses. To be eligible:
-
The home office must be used regularly and exclusively for work.
-
More than 50% of working time must be spent in the home office.
Deductible expenses include a portion of rent, utilities, and maintenance costs.
7. Travel Allowances and Reimbursements
If you receive a travel allowance or are reimbursed for business travel, you can claim deductions based on actual business kilometers traveled. Keeping a detailed logbook is essential to substantiate these claims.
8. Donations to Public Benefit Organisations (PBOs)
Donations to approved PBOs are deductible up to 10% of taxable income. Ensure you obtain a Section 18A certificate from the organization to claim this deduction.
9. Capital Gains Tax (CGT) Exemptions
The first R40,000 of capital gains is exempt from CGT for individuals. Additionally, a primary residence exclusion allows for the first R2 million of gain on the sale of a primary residence to be exempt.
10. Small Business Corporation (SBC) Tax Rates
Qualifying small businesses benefit from reduced corporate tax rates:
-
Up to R91,250: 0%
-
R91,251 – R365,000: 7% of taxable income above R91,250
-
R365,001 – R550,000: R19,163 plus 21% of taxable income above R365,000
-
Above R550,000: R58,013 plus 28% of taxable income above R550,000
These rates encourage the growth of small enterprises by offering tax relief.
11. Learnership Allowances
Employers can claim deductions for registered learnership agreements. The allowance is R40,000 per learner per year, with an additional R40,000 upon successful completion. For learners with disabilities, these amounts increase to R60,000.
12. Employment Tax Incentive (ETI)
The ETI encourages employers to hire young workers by reducing the amount of PAYE payable. Eligible employers can claim up to R1,000 per qualifying employee per month during the first 12 months and up to R500 in the subsequent 12 months.
13. Wear and Tear Allowances
Depreciation of assets used for trade purposes can be claimed as wear and tear allowances. Rates vary depending on the asset type, with SARS providing guidelines on acceptable write-off periods.
14. Depreciation for Business Assets
Businesses can deduct the depreciation of assets used for trade over their useful life. The depreciation rates are determined by SARS and differ by asset type. This helps businesses manage expenses while reducing taxable income.
15. Education and Training Expenses
Self-employed individuals and businesses can deduct expenses related to skills development, employee training, and tuition fees for further education, provided they are relevant to the trade or profession.
16. Fringe Benefit Tax Exemptions
Certain employer-provided benefits, such as bursaries for employees’ dependents, medical aid contributions, and low-interest loans, may be exempt from tax or qualify for reduced taxation under SARS guidelines.
17. Tax-Free Savings Accounts (TFSA)
Contributions to tax-free savings accounts offer a way to save without incurring tax on interest, dividends, or capital gains. The annual contribution limit remains at R36,000, with a lifetime cap of R500,000.
18. Foreign Income Exemption
South African residents working abroad for more than 183 days (with at least 60 consecutive days outside the country) may qualify for a tax exemption on the first R1.25 million earned. Keeping detailed records and employment contracts is essential to claim this benefit.
Maximizing Tax Savings in 2025
To take full advantage of these deductions, South Africans should:
-
Keep accurate and detailed records of expenses and income.
-
Work with a qualified tax consultant to ensure compliance with SARS regulations.
-
File tax returns on time to avoid penalties and interest.
-
Stay informed about tax law changes and new deductions introduced in future budgets.
By strategically using these deductions, individuals and businesses can legally reduce their taxable income and retain more earnings.