The "silent" budget: why your take-home pay will shrink even if tax rates stay the same

Every year, South Africans gather around their screens with one burning question for the Finance Minister: "Are my taxes going up?" If we look at the headlines on budget day, the answer might technically be "no." The Minister is unlikely to announce a dramatic increase in personal income tax rates. But for the average salary earner and the professional middle class, the real answer is almost certainly "yes." Welcome to the era of the "Stealth Tax."

The Inflation Trap (Fiscal Drag)

The government’s most effective tool for raising revenue isn't a new tax law; it’s inflation. If you receive an inflation-linked salary increase this year - say 5% - but the tax brackets aren't adjusted to match it, you effectively get pushed into a higher tax bracket. You earn more on paper, but you take home less in real terms.

In 2026, with the Treasury desperate to plug a multi-billion rand revenue hole, "Fiscal Drag" is the easiest lever to pull. It allows the government to collect billions more in revenue without the political backlash of officially announcing a tax hike. It is silent, invisible, and incredibly effective.

The shrinking shield: medical aid credits

The most aggressive form of this "passive" taxation is happening to your healthcare. For years, we have debated whether the government will scrap Medical Aid Tax Credits to fund the National Health Insurance (NHI). The reality? They don't need to scrap them to make them irrelevant. They just need to let inflation do the work.

For the last few budget cycles, the Medical Scheme Fees Tax Credit has barely moved. In real terms, it has stagnated. Meanwhile, your medical aid premiums haven't. Medical inflation typically runs at CPI plus 3-4%. Every year, your contribution jumps by roughly 10%, but the tax credit - the small monthly rebate SARS gives you to subsidize that cost - remains virtually frozen.

Let’s do the maths: If your premium goes up by R500 a month, but your tax credit stays the same, that entire R500 increase comes directly out of your post-tax pocket. Five years ago, the credit might have subsidized 15% of your bill; today, it covers far less. This is a "passive" implementation of NHI funding - weaning you off the private healthcare subsidy without legally removing it.

The "Two-Pot" hangover

Finally, we must consider the new "Two-Pot" retirement system. While it offers liquidity, it is also a tax trap. Withdrawals from your "Savings Pot" are taxed at your marginal rate - the highest rate you pay.

I suspect many South Africans will unintentionally push themselves into higher tax brackets by making withdrawals, resulting in a tax bill they didn't budget for. The immediate relief of cash today often comes with a severe tax headache tomorrow.

The bottom line

For the individual taxpayer, the 2026 Budget isn't about handouts or relief; it’s about defence. The government is tightening the net not by changing the rules, but by aggressively enforcing the ones that already exist and letting inflation erode your benefits. The gap between what you earn and what you keep is widening - not with a bang, but with a whisper.

* Collop CA (SA), CTA is the founder of Collop Tax Collective

PERSONAL FINANCE