You have to see where you can pay as little tax as possible though donation exemption, retirement annuity contributions and tax-free savings.
You can probably still taste the mince pies or feel the sand between your toes on the beach, but it is time to put the holiday memories aside and consider that the financial year-end is fast approaching.
Now is the time to take advantage of the 2025/2026 tax exemptions by 27 February 2026, says Mark MacSymon, senior wealth manager at Private Client Holdings. He says that leaving top-ups to the last minute tends to only increase the January administration hangover.
“Getting on top of these efficient tax planning and investment considerations as soon as you are back in office always alleviates pressure later in the month.”
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MacSymon says these include, but are not limited to:
Annual donations tax exemption
“The annual donations tax exemption for individuals is currently R100 000 per year. Any natural person can make the donation. Therefore, if you and your spouse make a donation the annual amount would be increased to R200 000.”
He adds that if you want to reduce your loan account to a trust using your annual donations tax exemption, it is a good idea to let your accountant know so they can complete the necessary paperwork.
Retirement annuity contributions
Retirement annuity (RA) contributions made before the tax year end may be tax-deductible within the legislative limit, says MacSymon. He explains that contributions to all retirement funds (pension, provident and retirement annuities) are deductible up to 27.5% of the greater of remuneration or taxable income, capped at an annual limit of R350 000.
RA’s are only accessible at retirement under normal circumstances and you must buy an annuity with at least a part (minimum of two-thirds) of the accumulated value.
“Contribution amounts must reflect in the product bank account on or before 26 February 2025 for processing on the following day,” MacSymon points out.
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Tax-free savings account contributions
Tax-free savings accounts (TFSA’s) provide South African investors with a flexible way to save towards a specific goal or supplement their retirement savings.
As TFSA’s are not subject to income or capital gains tax, MacSymon says that they can be a useful instrument to grow savings over the long term.
“The current annual contribution limit is R36 000 but if it is paid by debit order the maximum monthly amount is R3 000, while the lifetime contribution limit is R500 000. You can withdraw from a TFSA at any time and there is no tax on withdrawals,” MacSymon says.
He also points out that while an RA will not form part of your estate, a TFSA will.
“It is generally considered good practice to use a TFSA to supplement your retirement savings, even if you have not reached your maximum allowable contribution to an RA.”