The South African government’s 2025 budget proposal has sparked concern among small businesses due to a possible VAT (Value Added Tax) increase. While the aim is to boost national revenue, this move could directly affect your operations, pricing, and profits.
But don’t worry—we’ve broken it down for you, step by step.
What Is VAT?
VAT is a tax applied to the sale of most goods and services in South Africa.
- The current VAT rate is 15% (since 2018).
- The proposed increase could push it to 16% or more.
Even a 1% change can influence pricing, profit margins, and consumer behaviour.
Why Is a VAT Increase Being Considered?
- South Africa is facing budget shortfalls.
- Government needs to increase tax revenue.
- A VAT hike is easier to implement than other forms of tax.
How Will This Affect Small Businesses?
Here are 5 key areas where your business may feel the impact:
1. Reduced Consumer Spending
A higher VAT means higher prices. Customers may cut back on non-essential purchases, affecting retail, food, and personal service sectors.
2. Pressure on Pricing
If you pass the VAT cost to your customers, you risk losing sales. If you absorb it, your profit margins shrink.
3. Invoicing & Software Updates
Your accounting systems must reflect the new rate. This might mean updating POS systems, invoices, and price tags.
4. Cash Flow Issues
If you pay VAT before receiving customer payments, your cash flow could suffer—especially in high-volume, low-margin businesses.
5. More Compliance Pressure
Expect stricter audits and reporting requirements from SARS. Small errors could lead to fines.
What Can You Do to Prepare?
1. Review Your Pricing Strategy:
Consider small adjustments instead of large price hikes.
2. Talk to a Tax Professional:
Get expert advice to ensure you stay compliant and avoid unnecessary penalties.
3. Use Cloud Accounting Tools:
They auto-update VAT rates and reduce errors.
4. Stay Transparent With Customers:
Let them know why prices are changing—it builds trust.
5. Diversify Your Business Visibility:
List your business on directories like Pen To Point to get more local leads and traffic.
Vatulator
Vatulator – online VAT Calculator for South Africa. Add or remove 15% VAT in a click. Just
📍 Real Business Example
📌 Vatulator – Free Online VAT Calculator
📍 43 King George St, Braamfontein
Use it to quickly add or remove VAT from prices — ideal for fast invoicing.
“We use Vatulator every day — it helps us prepare invoices correctly and stay compliant.”
— Antony Kidless, Small Business Owner
Before & After VAT Price Example
| Item | Pre-VAT Price | 15% VAT | 16% VAT | Final Price (16%) |
|---|---|---|---|---|
| Haircut | R200 | R30 | R32 | R232 |
| Restaurant Bill | R450 | R67.50 | R72 | R522 |
| Clothing (Retail) | R1,000 | R150 | R160 | R1,160 |
💡 A small % increase = a big impact over time, especially in volume sales.
Stay Ahead with Smart Moves
Change is coming—but you don’t have to be caught off guard. Small businesses that adapt early will stay competitive.
Make sure you:
- Stay informed about government updates
- Adjust prices gradually
- Use tech tools for easy VAT compliance
- Focus on digital marketing to reach more customers
FAQ
The government is expected to finalize the rate by mid-2025 during the national budget announcement.
Yes. Your accounting and POS systems must reflect the new VAT rate to remain compliant.
Absolutely. Even freelancers, hairstylists, and food vendors need to adjust pricing and stay SARS-compliant.
Try Vatulator — a free online tool designed for South African businesses.
