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LIVING WITH NEW TAXES

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You should be checking your income and reducing your spending even more.
You should be checking your income and reducing your spending even more.

POSITIVE and negative things have been said about former finance minister Malusi Gigaba’s 2018 Budget.

Phillip Kassel, a certified financial planner at Liberty, said: The increase in taxes will hit lower-income earners the hardest. Now is the time for us to educate ourselves on the changes, in preparation for our meetings with financial advisers.”

The 1% VAT increase

“What many of us don’t realise is that the easiest way to clear the budget deficit would be to increase VAT by 2%. However, government seems to have realised that a 2% increase would have hit too hard.”

Your financial adviser should be telling you to tighten your purse strings.

Top income stays unchanged

The top income earners have not an increase in their tax brackets. In the past, income bands were moved slightly in order to accommodate inflation to avoid the tax creep. This is when an increase in earnings pushes a person into a new tax level so that they end up paying far more than the money they got with their increase or bonus.

It’s time to pay yourself first by increasing your savings and investments. Now isn’t the time to be buying new cars and flashy fashion accessories.

Sin and sugar taxes

Smokers and drinkers will always pay more for their vices but the new sugar tax adds to the sin tax.

This means that households that consume sugar need to watch how much they buy every week.

Government’s plan for a sugar tax is to encourage us to live a healthier lifestyle.

What your financial adviser should be telling you is that, perhaps, it is time to adopt a healthier lifestyle.

Higher estate duties

For wealthier people, there is a higher estate duty of 25% for estates greater than R30 million.

There is also an accompanying increase in the rate of donations tax for amounts over R30 million, which started on 1 March.

Your financial adviser should be telling you that this is the time to prepare a portfolio so that you can double check your last will and testament. You need to make sure your inheritance is covered.

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