How to use the Budget Speech in your personal finances

Departments failing to pay suppliers on time

Just as our national economic situation feels exposed, the same can be said when it comes to many South Africans’ personal finances.

While the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI) Q42020 reported a recovery of 47.5 points in Q4 from 43.5 points in Q3, consumers remain financially vulnerable – particularly with the arrival of the second strain and return to lockdown level 3 in late December, which again impacted livelihoods and incomes.

Government’s appreciation of this was evident in yesterday’s tabling of the national Budget speech, as Minister Mboweni did what he could to avoid increasing taxes that would directly impact consumers.

Janine Horn, Financial Adviser at Momentum Financial Planning urges South Africans to get close to the Budget Speech, to better understand how these announcements tabled by the Minister of Finance affect them.

Horn shares top take-outs from Budget Speech 2021 which, impact consumers directly and indirectly:

Personal Income Tax changes

South Africans have been under enormous financial stress in the last year with job losses and salary cuts abound due to the impact of the pandemic. Horn says that we should all breathe a small sigh of relief, however, as the Minister has not increased personal tax income.

In yesterday’s Budget, Minister Mboweni announced an above inflation tax relief provided by the annual inflationary adjustment to the tax tables, with an overall adjustment of 5% is provided for. The maximum tax rate remains at 45%.

“This is great news as any changes to income tax dictate how much we take home from our salary – and if you were one of those hard hit by the pandemic, increases would have hurt your finances.”

The Minister also added another welcome bit of relief for consumers in the way of an increase in the tax brackets for individuals, meaning that there will be no bracket creep this year.

“Bracket creep is the phenomenon where the government collects increased tax revenue without making increases to the tax rate,” explains Horn.

In addition, due to the large scale move towards working from home over the past year, a review of current travel and home office allowances will take place to determine their efficacy, equity in application, simplicity of use and certainty.

This will be a multi-year project, starting with consultation during this 2021/22 tax year. This is also likely to help alleviate the pressure on consumers, says Horn.

She advises consumers to take advantage of this slight alleviation of pressure, and re-plan, re-budget and re-prioritise their income versus expenditure.

“A solid budget plan is essential to help you understand what’s coming into your bank account vs your expenditure,” says Horn.

Less than expected fuel levy hikes but guilty pleasures will cost more

Fuel levies will be increase by 27 cents per litre. This includes 15 cents per litre for the general fuel levy, 11 cents per litre for the Road Accident Fund levy and 1 cent per litre for the carbon fuel levy.

While the fuel levy increases are actually lower than expected – Horn says this may be offset by the increase in sin taxes.

“A little indulgence will now cost you more thanks to a rise in excise tax (or ‘sin tax’ as the country knows it). As from tonight, your favourite tipple will cost you upwards of 14c more.

“The question is, do you over indulge or do so sparingly? With alcohol and cigarettes both going up, you need to think about cutting down on some of your indulgent behaviours in order to save.”

Horn advises consumers to start thinking about buying their consumables and enjoying them in the comfort of their homes instead of paying extra high costs in bars or pubs.

Alternatively, consumer could consider lowering their personal consumption or quitting altogether – which will be good for both their health and their pocket. 

Cost of the COVID-19 vaccine

Another win for the consumer, says Horn.

“Government has agreed to bankroll the nationwide vaccine rollout effort. Government wants to vaccinate 67% of the population in a year, and Mboweni and his team have allocated an initial amount of R9 billion for the vaccines – which they say can increase to closer to R20 billion.

In conclusion, Horn urges consumer to empower themselves with knowledge to be able to make sound financial decisions. She also adds that there is no substitute for the right advice, reminding consumers that financial advisers are available to help them navigate their financial journey to success.

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