Bracket Creep in 2026: The Hidden Tax That Could Be Cutting Your Pay

With the Budget Speech taking place tomorrow, many South Africans will be listening closely. Most of us breathe a sigh of relief when we hear that “tax rates remain unchanged”. No hikes? Good news.

Or is it?

Even when official tax rates stay the same, your take-home pay can still shrink. The reason is something called bracket creep — a quiet, often overlooked force that steadily increases the tax you pay.

Let’s unpack what this means for you in 2026.

What Is Bracket Creep?

South Africa has a progressive tax system. This means the more you earn, the higher the percentage of tax you pay on portions of your income.

Tax brackets are set at fixed income levels. When your salary increases — even if it is just to keep up with inflation — you may move into a higher tax bracket. While your pay has gone up in nominal terms, your purchasing power may not have improved.

This is bracket creep.

Importantly, tax rates themselves haven’t increased. But because the brackets haven’t been adjusted for inflation, a larger share of your income is taxed at higher rates.

In effect, it’s a silent tax increase.

Why 2026 Matters

Bracket creep is not new. However, its impact becomes more noticeable when tax brackets are not adjusted for several years in a row.

South Africa’s economy has faced slow growth and fiscal pressure. Personal income tax remains one of the government’s largest sources of revenue. When brackets are not fully adjusted for inflation, Treasury collects more revenue without formally raising rates.

If tomorrow’s Budget again leaves tax tables unchanged — or only partially adjusted — this will add to the cumulative pressure already felt by households.

One year may seem manageable. Several years compound the effect.

How It Reduces Your Real Income

Let’s make this practical.

Imagine you receive a 5% salary increase. That sounds positive. But if inflation is 5% and tax brackets remain unchanged, more of your income may fall into a higher tax band.

The result?

• A larger portion of your salary increase goes to tax.

• Your effective tax rate increases.

• Your take-home pay grows by less than expected.

• Your real purchasing power may actually decline.

You may feel as though you are running to stand still.

Many employees only realise the impact when their first payslip of the new tax year arrives and the net amount looks disappointingly familiar.

Who Feels It Most?

Bracket creep does not affect everyone equally.

Middle-income earners

Professionals and skilled workers are often hit hardest. They are more likely to move into the next marginal bracket after annual salary adjustments. At the same time, they are managing rising bond repayments, school fees and transport costs.

Those near the tax threshold

For individuals earning just below the tax threshold, even a modest increase can mean becoming liable for PAYE for the first time. That reduction in disposable income can come as a shock.

Single-income households

Where one salary supports the household, there is less flexibility to absorb the erosion of income.

Anyone without tax planning

Without a structured financial plan, bracket creep simply chips away at income year after year.

The Wider Impact

While bracket creep is a personal finance issue, it also has broader effects.

Reduced disposable income affects consumer spending. Businesses may face increased wage negotiation pressure. Employees feel frustrated when salary increases fail to translate into meaningful improvement.

Over time, this can also influence tax morale — the perception of fairness in the system.

It may be subtle, but its effects are real.

What to Watch in the Budget Speech

As you listen to tomorrow’s Budget, here are a few key areas to pay attention to:

• Are personal income tax brackets adjusted for inflation?

• Have the primary, secondary or tertiary rebates increased?

• Are medical tax credits revised?

• Are there changes to retirement contribution limits?

• Are any new levies introduced?

Even a partial adjustment can ease pressure. No adjustment at all would mean bracket creep continues to bite.

How You Can Protect Yourself

While you cannot control tax policy, you can control your financial planning.

1. Maximise retirement contributions

Rethink your retirement planning. Contributions to retirement funds are tax deductible (up to 27.5% of taxable income, subject to limits). Increasing contributions can reduce your taxable income while building long-term wealth.

2. Use tax-free investment accounts

Although contributions are made from after-tax income, growth within these accounts is free from income tax, dividends tax and capital gains tax.

3. Review your remuneration structure

In some cases, structuring bonuses, allowances or benefits differently may improve tax efficiency. Professional advice is important here to ensure compliance.

4. Be strategic when negotiating increases

When discussing salary adjustments, consider both inflation and tax. A raise that simply matches inflation may not preserve your purchasing power once tax is factored in.

5. Review your financial plan annually

Small erosions add up over time. Regular reviews with a qualified financial adviser can help ensure your savings, investments and cash flow remain aligned with your goals.

Should Tax Brackets Be Automatically Adjusted?

In some countries, tax brackets are automatically adjusted for inflation. This process, known as indexation, prevents bracket creep from occurring unless deliberate policy changes are made.

South Africa does not have automatic indexation. Adjustments are made at the discretion of the Minister of Finance each year.

There are fiscal trade-offs involved. However, predictability and transparency matter for households planning their financial futures.

Final Thoughts

Budget headlines often focus on whether tax rates have increased. But the real story may lie in whether tax brackets are adjusted.

Bracket creep is quiet. It doesn’t make dramatic announcements. Yet over time, it can meaningfully reduce your take-home pay.

The good news is that proactive financial planning can soften the impact. Reviewing your tax position, retirement contributions and investment strategy each year helps ensure you remain on track — regardless of policy shifts.

As we await the Budget Speech, one thing is clear: staying informed and planning ahead remains your strongest defence.

At Holborn Africa, we help you put the right financial systems in place to protect your income and long-term goals. If you would like clarity on how bracket creep may affect you, get in touch with our team.