Get more income, pay more tax

Higher interest income: good. Higher tax bill: bad

WITH THE repo rating having more than doubled in less than 2 years, the amount you can hold in an interest-yielding bank or money market account before being subject to income tax at your marginal tax rate has reduced materially.

Having just completed my 2022/23 income tax return, it became very clear very quickly just how punitive interest income now is from a tax perspective. The repo rate has increased from a low of 3.5% as recently as October 2021 to 8.25%, following the 50 basis-point rate hike in May 2023.

However, while placing the economy and the consumer under increasing pressure, the higher interest rates on offer have been welcomed by savers—and, no doubt, by SARS!

SARS exempts from income tax any interest income earned from a South African source by any individual under 65 years up to R23 800 per annum, and individuals 65 and older, up to R34 500 per annum. However, it is noteworthy that there has been no change to these amounts since the 2014 year of assessment.

The net effect is that the amount you can hold in an interest-yielding bank or money market account before…