VAT Hike Reversed: What It Means for Your Wallet

The start of May usually brings about colder weather in South Africa, but this year brought with it an additional chill — not from the skies, but from the finance minister’s desk. We braced for the seasonal drop in temperature, and were met with the icy probability of a VAT hike that left us on edge.

The rising cost of living has meant that more and more South African consumers rely on debt just to get by. This is especially true for low-income households. During the 2025 Budget Speech, the Minister of Finance announced the proposed VAT hike. This was planned as a two-phase hike—from 15% to 15.5% on May 1, 2025, and then to 16% in April 2026. With the VAT hike reversed: what does it mean for your wallet?

Immediate Cost Relief:

The VAT hike would have led to an immediate increase in costs nationwide – in fact, many retailers and service providers were already busy updating their pricing structures. For South Africans struggling to get by, even a small increase in daily prices would add up quickly. You can stick to a similar budget for now, without worrying about immediate price hikes on daily essentials. Budgeting with the 50-30-20 rule is one way to ensure balance in your finances.

Preserved Spending Capacity:

Thanks to the VAT hike reversal, you can preserve your income, and your spending capacity should remain more or less the same. This is a good thing for our economy and helps local businesses thrive. When consumers can keep spending, businesses benefit from steady sales, which helps them stay open, keep staff employed, and even grow. As long as you spend wisely and don’t fall behind on your debt repayments. If you’re struggling with debt, use this checklist to see if you need Debt Counselling.

Helps Keep Everyday Costs Down

Even though many basic items like bread and milk are exempt from VAT, a VAT increase on other goods still pushes up overall living expenses. By reversing the hike, the government helps slow down rising prices in areas like groceries, clothing, and services that many of us use every day — this makes it a bit easier for you to manage expenses and keep up with bills. Here you can see which grocery items are exempt from VAT in South Africa.

You have Time to Prepare

The VAT hike suspension gives you more time to prepare for inevitable VAT hikes. Future changes to your budget should be planned for as soon as possible, giving you time to make the necessary adjustments. If you are having difficulty managing your monthly payments to creditors, now is the time to take control and improve your finances. Debt Counselling provides hope for those in need and can improve your quality of life.

At Debtco Group, we offer a reputable Debt Review service to South Africans who are over-indebted. If your debts are stopping you from living comfortably, we can help you. Try our FREE CREDIT CHECK to see if you can benefit from Debt Review and start recovering your financial stability. Contact us today to get started!