Here's how the 2021 national budget will affect homeowners

"Hope is being able to see that there is light despite all of the darkness. He observed that sometimes we forget that just beyond the clouds the sun is shining." 

These were the opening words of the Minister of Finance, Tito Mboweni when he recently delivered the annual national budget speech. Unlike the previous year's change to the transfer duty threshold, this year saw no direct changes to the property industry. However, the property sector is intertwined with the economics of the country. 

What were the key changes?

The highlights from the 2021 Budget Speech are summarised below:

• Above-inflation increase of 5% in the personal income tax brackets and rebates, which is expected to provide relief of R2.2 billion.
• The Unemployment Insurance Fund contribution ceiling will be increased to R17 711.58 per month from 1 March 2021.
• The corporate income tax rate will be lowered to 27 per cent for companies with years of assessment commencing on or after 1 April 2022.
• Fuel levies to increase by 27 cents per litre. This will comprise 15 cents per litre for the general fuel levy, 11 cents per litre for the Road Accident Fund levy, and 1 cent per litre for the carbon fuel levy. 
• Excise duties will be increased by more than inflation with excise duties on alcohol and tobacco increasing by 8%.
• The plastic bag levy will be reduced to 12.5 cents per bag for bio-based plastic bags, from a date to be announced later in the year

Personal income tax was a hot topic surrounding the days leading to the budget speech. With the country seeing a second wave of the Coronavirus pandemic and unemployment reaching all-time highs, the general public was against any personal income tax increase. Talk about tax revolts were also brought up. 

To much surprise, regulations for personal income tax was more optimistic than expected. The minister highlighted that the personal income tax bracket will increase by 5 per cent, which will provide R2.2 billion in tax relief. This will help reduce the tax burden on lower and middle-income households. This means that you will have extra money to spend on necessities or towards your bond payments as of March 2021. You can calculate your tax reductions and plan your monthly budget. 

Further good news for homeowners comes in the form of tax rebates. A rebate is an amount by which SARS reduces the actual taxes owing depending on certain circumstances. You can expect an increase in primary tax rebates up to R15 714. Secondary rebates will increase to R8 613, while tertiary rebates are set to increase to R2 871. 

What has not changed?

If you are selling your property and expect a profit of more than R2-million profit, bear in mind that capital gains tax remains unchanged. The capital gains tax inclusion rate for individuals and special trusts remains at 40%, and for other taxpayers at 80%. 

The transfer duty threshold also remains unchanged, where buyers are exempted from paying for any transfer duty costs on properties under R1-million. Along with commercial banks' prime lending rate at 7%, first-time buyers eyeing a home priced under the transfer duty threshold can save tons of money which can be used towards their bond or used for renovations in their new home. 

The duty levied on the dutiable value of an estate remains at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. The basic deduction of R3.5 million is still allowed in the determination of an estate's liability for estate duty. 

The 2021 budget review further revealed that R12.6 billion was allocated to various sectors to create about 694 000 short-term jobs. Given the disrupting pandemic and loss of jobs, there is hope yet again for the country. Especially for those who plan to buy a home in the 2021/2022 financial year. Contact Knight Frank today for all your property needs.