What You Need to Know:
Keeping track of tax updates is important to manage your money well and avoid any surprises. Tax rules change from time to time, and these updates can have a big impact on how much you owe and what you can claim. Knowing about these changes helps you stay compliant and make good financial decisions. Here’s a simple guide to the latest tax updates in South Africa:.
New Personal Income Tax Rates
South Africa has adjusted personal income tax rates. For those with higher earnings, moving into a higher tax bracket means paying a higher percentage on the income that exceeds the lower bracket. For example, if your income is very high, you could pay up to 45% on the portion over the top limit of the lower brackets. On the other hand, to assist lower-income earners, the amount you can earn before moving to a higher tax bracket has increased slightly, helping you keep more of your money.
Changes to VAT
Value-Added Tax (VAT) has changed recently. The VAT rate has gone up from 15% to 16%, so you’ll pay a little more on most goods and services. However, basic food items are still taxed at a lower rate or not at all. Also, new VAT rules now apply to online services like streaming and subscriptions, so you’ll see VAT added to bills for things like Netflix or online magazines.
Updates on Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is what you pay on the profit when you sell an asset for more than you bought it for. Recent updates include:
- Higher CGT Inclusion Rate: More of your capital gains will be added to your taxable income. For individuals, 40% of the gain is included in your taxable income. For companies, this rate is 80%.
- Increased Exemption Limits: You can now make more profit from selling assets without paying CGT. The first R40,000 of capital gains per year is tax-free. Also, if you sell your main home, the first R2.5 million of profit is exempt from CGT.
New Provisional Tax Rules
Provisional tax rules have been updated for income from sources other than regular jobs, such as freelance work or rental income. The process for calculating and paying provisional tax has been simplified, which helps you estimate your payments more accurately and avoid overpaying and underpaying. Additionally, penalties for late payments have been reduced, giving you some relief if you miss the deadline.
Adjustments to Retirement Fund Contributions
Recent updates to retirement fund contributions include higher deduction limits, so you can now put more into your retirement fund and get a bigger tax break. Also, the amount your retirement savings can grow without being taxed has increased. This means it’s even more advantageous to save for retirement.
Tax Relief for Small Businesses
Small businesses play a big role in the economy, and recent updates provide them with some support:
Higher Turnover Tax Threshold: The turnover limit for small businesses to qualify for the turnover tax system has been raised. This means more businesses can benefit from the simpler tax rules and lower rates.
Easier VAT Registration: The process for small businesses to register for VAT has been streamlined. This makes it easier for businesses with turnover close to R1 million to manage their VAT.
Impact of COVID-19 on Taxes
The COVID-19 pandemic has brought about temporary tax measures to help those affected. Businesses facing difficulties due to the pandemic are getting tax relief, which includes extra deductions for some expenses. If you’ve been working from home because of COVID-19, you can now claim deductions for home office costs. This includes a portion of your rent, utilities, and other related expenses.
Conclusion
Keeping up with tax updates helps you manage your finances better and avoid unexpected costs. Recent changes to personal income tax rates, VAT, capital gains tax, provisional tax, retirement fund contributions, and support for small businesses and those impacted by COVID-19 all affect how much you pay and what you can claim. By understanding these changes, you can adjust your financial planning and make sure you’re in line with the latest rules. If you’re not sure about how these updates affect you, it’s a good idea to talk to a tax professional or tax consultant for better advice. what about us, taxology.co.za