A Divercity's affordable housing initiative in which the Public Investment Corporation made an investment in years ago.
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Bracket creep has been building up in South Africa, and with rising inflation, its impact is expected to become more pronounced, even impacting the country’s property buyers' ideals.
This is because personal income tax tables have not been adjusted since the 2023/24 tax year, says Raeesa Kader, the academic programme leader at the School of Accounting, Finance and Tax at the Management College of Southern Africa (Mancosa).
“For aspiring homeowners, this means affordability drops, forcing compromises on location, size, or property quality.”
Fiscal drag, also known as bracket creep, occurs when inflation causes taxpayers to be pushed into higher tax brackets, thereby increasing their tax burden even though their real income has not changed. Higher taxes reduce disposable income, which can slow consumer spending and economic activity.
Kader said over the past few years, stagnant income brackets combined with rising living costs have slowed demand in the middle-income housing segment. She said while the property sector currently benefits from lower interest rates, that cushion may be short-lived.
“In July 2025, South Africa's inflation rose to 3.5%, the highest rate since September 2024, as reported by Statistics South Africa. Fortunately, the transfer duty table has been adjusted for inflation, providing some relief.
"Ultimately, the only sustainable relief is to adjust tax brackets, as this would help protect middle-income homeowners and stabilise the market, ensuring that taxes remain fair without placing excessive burdens on taxpayers,” Kader said.
As South Africa navigates another challenging tax year, a subtle yet significant financial pressure is beginning to affect more employees across the income spectrum, says Tanya Tosen, tax and remuneration specialist at Tax Consulting SA.
“For the third consecutive year, the South African Revenue Service (SARS) did not adjust the individual income tax tables in line with inflation, a decision with far-reaching implications for both employers and employees,” Tosen says.
She said this lack of inflationary relief, commonly referred to as bracket creep, is creating a “silent tax” that is slowly reducing take-home pay across the board. This is starting to show in employee expectations, frustration, and payroll pressures, she adds.
Tax Consulting SA said while SARS has held tax rates steady, the real cost to employees continues to climb. The tax specialist firm said that as salaries increase modestly each year, whether through performance bonuses, annual inflationary adjustments, or fringe benefits, more income is pushed into higher tax brackets.
“But since the tax brackets have not moved, employees are paying more tax on income that has not truly increased in purchasing power. This phenomenon, bracket creep, is largely unnoticed by most employees until their take-home pay starts shrinking despite apparent pay increases.
“SARS itself has projected an additional R19.5 billion in collections for the 2025/2026 tax year, directly attributable to this approach. That is a staggering number, and it is coming from the pockets of working South Africans, many of whom are already thinly stretched.”
Tosen says that perhaps the most profound impact is being felt by lower-income earners, particularly those who previously earned just under the tax threshold and never paid PAYE. She said that with static thresholds and modest pay increases over the past few years, more of these individuals are now subject to PAYE for the first time.
“This can be both confusing and demoralising. Employees who have not had any significant lifestyle change or meaningful raise are suddenly taking home less net pay than expected. The sense of loss is amplified by the sharp increases in the cost of essentials like transport, food, electricity, and school fees.”
The firm said this situation places employers in a difficult position as many are operating in cost-conscious environments, with tight salary budgets and limited room for above-inflation increases.
“Yet, as employees face shrinking pay cheques, they are understandably looking to their employers to bridge the gap. The consequence is mounting pressure on HR and payroll teams to explain why net pay is decreasing and to justify why the company is not simply 'topping up' packages.”