This post was published on Apr 25, 2025
South Africa’s VAT rate increase from 15% to 15.5%, starting on 01 May 2025, as announced in the Minister of Finance’s 2025 Budget Speech plan has changed due to political opposition and internal disagreements within the coalition government. This adjustment, while common, would have lead to higher premiums across the board for many products and services, from groceries to banking, including insurance. It’s important to understand how this change would have affected your financial planning, especially regarding your insurance premiums.
Key dates for the VAT increase in South Africa
- VAT increase announced on 12 March 2025:
The South African government officially confirmed the rise in VAT in the 2025 Budget Speech. - 15.5% New VAT rate proposed effective date 01 May 2025:
From this date, all goods and services, including insurance premiums, will reflect the new VAT rate. - 16% New VAT rate proposed effective date 01 April 2026:
From this date, all goods and services, including insurance premiums, will reflect the new VAT rate. - Cancelled VAT increase announced on 24 April 2025:
The South African government officially confirmed VAT rate to remain unchanged in media statement.
How would the VAT increase have impacted your insurance?
Implications for businesses and consumers
For most businesses, including insurance companies, the VAT increase leads to higher operational costs, which are often passed on to consumers. Insurance premiums are subject to VAT, meaning any increase in the VAT rate directly impacts the cost of insurance. The VAT increase will impact many insurers as they adjust their premiums to accommodate the added tax burden. For insurance products like health and vehicle insurance, you can expect an increase in premiums, reflecting the VAT adjustment.
For example, if your current insurance premium is R1,000, 15% of that is VAT, so your VAT contribution is R150. If the VAT rate increases to 15.5%, you would need to contribute an additional R5 in VAT. This increase would mean your premium rises to R1,005. While the increase might seem small when looking at a single policy, the combined effect across all the products and services you purchase adds up over time. For example:
Item to purchase (weekly) | Cost per item | Additional VAT (.5%) cost |
Bread | R15.99 | R0.08 |
Milk 2L | R29.99 | R0.15 |
Oats 1kg | R49.99 | R0.25 |
Oil 2L | R89.99 | R0.45 |
Pasta 500g | R15.99 | R0.08 |
Baked beans 400g | R17.99 | R0.09 |
Rice 2kg | R39.99 | R0.20 |
Eggs 6 pack | R19.99 | R0.10 |
Electricity | R250 | R1.25 |
Airtime | R100 | R0.50 |
Petrol (R20.79 per l) | R415.80 (20 litres) | R2.08 |
Bank charges (Capitec account) | R7.50 | R0.04 |
Rent | R2000 | R10 |
Total | R3032.24 | R15.19 |
You’d be spending an extra R15.19 a week, which adds up to R60.76 a month, and over the course of a year, that’s an additional R729.12. While this increase might not seem significant on a single product, it’s a substantial amount when considering your entire weekly and monthly expenses.
How the VAT increase would have affected your insurance premiums and claims
- Higher premiums due to the increased tax on insurance products
- Increased cost of non-life insurance policies (e.g., health, vehicle)
- Adjustments to insurance claim payouts
While the VAT increase won’t directly affect your claim payouts, the administrative costs of processing claims may rise for insurers. This could potentially influence future claims or the handling of policy-related requests.
The VAT increase will no longer take effect on May 1, 2025. The decision to keep VAT at 15% means insurance customers will not face the anticipated premium increases related to the tax hike. This stability allows individuals and businesses to maintain their current insurance coverage without additional financial strain.
At iWYZE, we are dedicated to providing affordable and reliable insurance solutions. With the VAT rate remaining unchanged, our customers can continue to enjoy comprehensive coverage without unexpected premium hikes. We remain committed to transparency and will keep you informed about any future changes that may affect your insurance policies.
