With the new tax year now upon us, financial advisors encourage South Africans to take a closer look at their finances and use this moment as an opportunity to improve how they save, invest and manage their money. Beginning of Tax This year is one of the most practical moments for families to reset their financial strategies.
Working closely with clients every day, our team sees how even small changes in behavior can make a meaningful difference to financial outcomes over time.
Start early to maximize tax-free investing
Tax-free savings accounts (TFSAs) are one of the most effective tools available to South Africans looking to grow their wealth without paying tax on interest, dividends or capital gains. Over time, saving in a tax-free investment can increase the value of the investment by an average of about 25% compared to the same type of tax-exempt investment..
Investors who contribute to their TFSA early in the tax year can increase the future value of their investments by up to 16% by giving their money more time to compound. Many people only think about their TFSA contributions at the end of the tax year. But starting earlier gives your investments more time in the market, which can significantly improve the end result.
Potential tax adjustments could provide temporary relief
Expected adjustments to individual income tax tables could help offset the bracket creep experienced last year, potentially leaving households with slightly more disposable income. With recent interest rate decreases, this may provide an opportunity for consumers to focus on reducing debt. Even small additional payments towards the loan can shorten repayment terms and significantly reduce the amount of interest paid over time.
Use tax benefits to strengthen financial planning
The new tax year is also a good time to review financial products that offer tax benefits. Medical aid contributions continue to qualify for the medical tax credit, which is expected to remain in place as the implementation of the National Health Insurance (NHI) is still delayed. For individuals looking to reduce their taxable income, increasing contributions to retirement annuities (RAs) can also be an effective strategy.
Additional voluntary contributions can increase the available tax deduction while strengthening long-term retirement savings. Review budget and expenses. In addition to tax planning, the new tax year also provides a useful checkpoint for families to reevaluate budgeting and spending habits. This may include tracking expenses more closely, separating shared or variable costs into a dedicated account to avoid overspending, and reviewing insurance policies to ensure that cover still reflects the current value of the property.
With interest rates beginning to soften, it is also a good time for households to focus on paying off debt faster where possible. Speaking to a financial advisor can help individuals identify opportunities to improve tax efficiency in their portfolio, rebalance investments, and make better use of available financial tools. The main thing is to stay active. When you review your finances at the beginning of the tax year, you give yourself more time to make decisions that can positively impact your financial well-being.
* Chetty is head of consulting at Voucher.
personal Finance