In a decisive move to support South African households and businesses, the 2026 Budget tabled today introduces significant relief measures designed to combat the “stealth tax” of inflation. By adjusting tax structures and increasing investment caps, the National Treasury has signaled a commitment to preserving the purchasing power of citizens in a shifting economic landscape.
1.Inflation Relief: No More “Stealth Tax” on Salaries
The most significant highlight for individual earners is the adjustment of Personal Income Tax brackets and rebates. In previous years, stagnant brackets meant that even modest inflationary salary increases pushed taxpayers into higher tax percentage, known as “bracket creep.” By moving the brackets to compensate for inflation, the Treasury has effectively ensured there is no inflation tax on salaries this year.
2026/27 Tax Brackets for Individuals
Additionally, the tax threshold has been set at R99,000 for those under 65, and up to R171,300 for those aged 75 and older.
2. Support for Small Business: New VAT & Turnover Tax Thresholds
To reduce the administrative burden on growing businesses, the budget has introduced a major change to Value-Added Tax (VAT) registration.
- Compulsory Registration: The threshold for mandatory VAT registration has been increased to R2.3 million per annum.
- Voluntary Registration: Small businesses and entrepreneurs making more than R120,000 (but less than R2.3 million) can still choose to register voluntarily to claim back input VAT.
This shift allows smaller enterprises to focus on operations rather than complex tax compliance during their early growth phases.
The increase in the turnover tax threshold from R1 million to R2.3 million is particularly impactful for small business owners. From an accounting perspective, this significantly extends the period during which micro and growing businesses can operate within a simplified tax regime, reducing compliance costs, administrative burden, and provisional tax complexity. In practical terms, it allows SMEs to scale meaningfully before transitioning into the standard corporate tax system — improving cash flow certainty and removing an inflation-driven constraint on growth.
3. Boosting Personal Wealth: Tax-Free Savings Cap Rises
In a move to encourage a culture of saving among South Africans, the annual limit for Tax-Free Investment contributions has been increased to R46,000 per year. Why it matters: Any interest, dividends, or capital gains earned within these accounts remain 100% exempt from income tax. This increase provides a larger “tax shelter” for individuals looking to build long-term wealth without fiscal liability.
4. Other key adjustments for individuals
- Excise Duties: Rates for alcoholic beverages and tobacco products will increase by 3.4%, keeping them in line with current inflation.
- Fuel Levies: The combined increase in fuel levies has been capped to match inflationary expectations.
- Tax-Exempt Benefits: The annual remuneration ceiling for tax-exempt bursaries and scholarships has been raised from R600,000 to R900,000.
Capital Gains Tax (CGT) Adjustments
Several CGT exclusions have been increased:
- Small business asset disposal exclusion: R10 000 000 → R15 000 000
- Exclusion on disposal of small business when over 55: R1 800 000 → R2 700 000
- Annual CGT exclusion: R40 000 → R50 000
- Primary residence exclusion: R2 000 000 → R3 000 000
These adjustments are meaningful for business owners planning exits and individuals selling property. The increased primary residence exclusion, in particular, protects middle-class homeowners from inflation-driven property appreciation triggering unintended CGT.
Retirement Savings & Investment Limits
- Tax-free investment annual limit: R36 000 → R46 000
- Retirement fund contribution deduction limit: R350 000 → R430 000
- Retirement interest de minimis threshold for annuitisation: R247 500 → R360 000
- Living annuity commutation limit: R125 000 → R150 000
This is strongly aligned with long-term financial resilience. Higher contribution deductibility benefits higher earners and business owners while encouraging disciplined retirement planning.
Donations Tax
- Entities exemption: R10 000 → R20 000
- Individuals exemption: R100 000 → R150 000
This improves estate planning flexibility.
Employee Benefits & Education
Several employment-related limits have increased:
- Bursaries/Scholarships annual remuneration ceiling: R600 000 → R900 000
- Employer-provided bursary limits (primary/secondary): R20 000 → R30 000
- Employer-provided bursary limits (tertiary): R60 000 → R90 000
- Remuneration proxy cap (employee loans): R250 000 → R360 000
- Market value of employer-provided loans for immovable property: R450 000 → R650 000
- Maximum compensation exemption for employees dying in line of duty: R300 000 → R800 000
- Awards for bravery and long service: R5 000 → R16 000
These changes provide meaningful tax relief for employees receiving bursaries or employer assistance and support workforce development through education incentives.
Overall, the 2026 Budget reflects a balanced approach—taxing consumption and “sins” while providing much-needed breathing room for salaries, savings, and small business growth. By aligning tax thresholds with inflation and drastically simplifying the VAT landscape, the National Treasury aims to foster a more resilient economy and provide much-needed relief to a strained tax base.
You can download the PDF doc here:
Contact our team today for a personalised tax consultation, we will ensure that you take full advantage of these new relief measures.
