When the Minister of Finance took to the podium for the 2025 South African Budget Speech, many small business owners held their breath. Among the most talked-about announcements? A 0.5% increase in VAT, raising the rate from 15% to 15.5% on 1 May 2025 and 1.5% increase to 17% on 1 April 2026.
For many small and micro businesses already navigating a tight economic landscape, this might feel like another blow. But here at Primorial, we believe in facing challenges head-on — and where possible turning them into opportunities.
What Does the VAT Increase Mean for You?
A 0.5% increase might not sound like much, but in practice, it can have a ripple effect:
- Higher input costs: From stock and materials to services, your suppliers will likely pass the cost on to you.
- Pricing pressure: You may need to adjust your own prices, which can be tricky in a price-sensitive market.
- Administrative updates: Systems, invoices, contracts, and point-of-sale tools all need to reflect the new rate.
Five Ways to Navigate the VAT Hike
- Review Your Pricing Strategy Rather than blanket increases, consider strategic pricing. Look at products or services where value is clear and price sensitivity is low. Focus on bundling, loyalty programmes, or tiered offerings to give clients options.
- Communicate Clearly If you do increase prices, explain why. Customers appreciate transparency, especially if you position your brand as honest and community-focused.
- Streamline Your VAT Reporting Accurate, timely VAT returns have never been more important. Use cloud accounting tools (like Xero) and consult with professionals (like Pirmoril) to avoid penalties or overpayments.
- Boost Efficiency Now is the time to cut waste. Are there areas in your business where you can improve margins? Outsource what you don’t need in-house. Automate what you can.
- Lean on Expertise As VAT regulations evolve, so should your approach. Primorial helps small businesses stay compliant and competitive with tailored VAT advisory and tax planning.
Looking Ahead With Confidence
Yes, a VAT increase adds pressure. But it can also be a catalyst for smarter pricing, better systems, more resilient planning and more focused busines management. With the right guidance and tools, your business can not only absorb the change — it can thrive through it.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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