Repo Rate Rises to 7.25%: What Does It Mean for Your Personal Tax?
The South African Reserve Bank (SARB) has increased the country’s key repo rate by *25 basis points to 7.25%*, effective 25 September 2026.
Following the increase, the *prime lending rate has risen to 10.75%*.
For households, the immediate concern is likely to be higher borrowing costs. But what does the interest-rate increase mean for your *personal tax*?
The answer is important: *the repo-rate increase does not mean that your personal income-tax rate has increased.* However, changes in interest rates can have an indirect effect on your tax position.
## 1. Higher interest on savings could mean more taxable interest
When interest rates rise, you may earn more interest from savings accounts, fixed deposits and other interest-bearing investments.
For the 2026/27 tax year, individuals under 65 have an annual South African-source interest exemption of *R23,800, while taxpayers aged 65 and older have an exemption of **R34,500*. Interest earned inside a Tax-Free Savings Account remains exempt, subject to the applicable TFSA rules.
This means that if higher interest rates push your annual interest income above your applicable exemption, the excess may become taxable.
Example:
If you are under 65 and receive R30,000 in taxable South African interest during the year, the first R23,800 is exempt. The remaining *R6,200* may form part of your taxable income.
## 2. Higher loan repayments do not automatically give you a tax deduction
A common misconception is that because interest rates have increased, the additional interest paid on a home loan or personal loan can simply be claimed as a tax deduction.
For most individuals, *interest on private debt is not automatically deductible against salary or other personal income*.
The tax treatment depends on what the borrowed money was used for and whether the expense meets the relevant requirements of the Income Tax Act.
For example, interest connected to the production of rental or business income may receive different tax treatment from interest on a loan used for private purposes.
This is why it is important to keep your personal and income-producing expenses properly separated.
## 3. Property owners should pay particular attention
If you own a rental property, rising interest rates can increase your financing costs.
Where interest expenditure qualifies as a deduction against rental income, the higher interest cost may affect the taxable profit from the rental activity.
However, *not every interest expense is deductible*, and the rules around rental losses and the ring-fencing of losses can be complex.
SARS has also confirmed changes to Section 20A of the Income Tax Act for years of assessment beginning on or after 1 March 2026, including the threshold at which certain trade losses can be ring-fenced.
If you have a rental property, it is therefore worth reviewing your numbers rather than simply assuming that a higher interest bill automatically reduces your tax.
## 4. Interest on overdue tax can add to your costs
Another important consideration is SARS interest.
If you owe SARS money and do not pay your tax liability on time, interest may be charged in accordance with the applicable SARS interest rates.
SARS currently lists *10.25% per annum* for late or underpaid tax from 2 March 2026. Interest rates administered by SARS are linked to specific statutory provisions and can change when the underlying rates change.
This makes tax planning and timely payment particularly important when household budgets are already under pressure from higher borrowing costs.
## 5. Your personal tax brackets have not increased because of the repo hike
It is important to separate *interest rates* from *income-tax rates*.
For the 2026/27 tax year, individual income-tax rates range from 18% to a maximum marginal rate of 45%. The tax brackets were adjusted by 3.4% for inflation.
The SARB’s decision to increase the repo rate does not itself change these income-tax brackets.
## What should taxpayers do?
With interest rates now higher, consider reviewing:
* Your interest income from savings and investments
* Whether you are approaching your annual interest exemption
* Interest and expenses relating to rental properties
* Business-related financing costs
* Your provisional tax calculations if you earn investment, rental or business income
* Any outstanding SARS tax balances
* Your overall cash flow and tax planning
The key message is simple:
*A higher repo rate does not automatically mean higher personal income tax — but it can change the numbers that feed into your tax calculation.*
At Nett Solutions, we help individuals and businesses understand their tax obligations, manage their tax affairs and plan ahead.
*Need help with your personal tax? Contact Nett Solutions for professional accounting and tax assistance.*