How the Tax-Free Savings Account (TFSA) actually works in South Africa — 2024/2025 limits explained

The tax-free savings account is one of the few genuine “free lunches” the South African government has ever given investors. Money you put in grows completely free of dividends tax, interest tax, and capital gains tax — forever.

The current limits (tax year 2024/2025)

Every tax year (1 March – 28/29 February) you may contribute up to R36,000 across all your tax-free accounts combined. Over your lifetime the total you’re allowed to contribute is R500,000. These limits have not changed since the product was introduced in 2015, which means inflation has quietly reduced their real value every year.

What happens if you go over the limit?

SARS automatically adds 40 % penalty tax on the excess amount every year until it’s withdrawn. That’s why most platforms now block contributions once you hit the annual or lifetime limit — the penalty is brutal.

What can you actually put inside a TFSA?

Almost anything listed on the JSE: ETFs, individual shares, listed property, bonds, and bank fixed deposits that are specifically structured as tax-free products. The cheapest and most popular choice for long-term investors is a low-cost global or local equity ETF (Satrix MSCI World, CoreShares S&P 500, Sygnia ITRX, etc.).

Why the tax saving is bigger than most people think

A simple example: R36,000 invested every year from age 25 to 65 at a realistic 10 % average annual return grows to roughly R9.8 million in a normal brokerage account after dividends tax and CGT. In a TFSA the same contributions grow to R15.9 million — an extra R6 million you never pay tax on.

Common mistakes South Africans make

• Using the TFSA as an emergency fund — withdrawals count against your lifetime limit if you ever want to put the money back.
• Choosing high-fee unit trusts inside the TFSA instead of low-cost ETFs.
• Forgetting that the limit is across all providers — many people accidentally have two TFSAs and breach the annual cap.

The bottom line: if you have any money you won’t need for at least 5–10 years, max out your TFSA every single year. It’s the closest thing to a legal tax loophole most ordinary South Africans will ever get.