Today’s Budget Speech by Minister Enoch Godongwana reflects a cautious but deliberate fiscal recalibration.
Individual tax brackets have not been adjusted since 2023/2024 tax year. The 2026/27 budget speech proposes an inflation adjustment for the tax tables and medical aid tax credits which should be welcomed by individual taxpayers. During the 2025/26 budget speech one of the contentious issues was the proposed increase in the VAT rate from 15% to 15,5% and later 16% which was ultimately withdrawn. This year, Government has introduced an adjustment to the individual tax tables. The change is enabled by an improved revenue outlook, with gross tax revenue for 2025/26 revised up by R21.3 billion due to stronger-than-expected net VAT, corporate income tax, and dividends tax collections. Below we summarize some of the key changes and their potential impact where relevant.
Contributions to retirement funds
When calculating the taxable income for individuals, contributions made to qualifying retirement funds are allowed as a deduction. These deductions were previously limited to lower of R350 000 or 27,5% of taxable income. In the 2026/2027 budget speech the Minister announced an increase of R80,000 on the “lower of” amount (R350 000 to R430 000).
Impact:
The increase of the lower amount should allow qualifying taxpayer to claim higher retirement deductions, which should in turn mean lower taxes paid on same level of income and contributions.
Capital gains tax from sale of primary residence
In 2025/2026 tax year if you sold your primary residence and made a capital gain of R3 000 000, you would have been subject to capital gains tax on R1 000 000 as the first R2 000 000 was exempt from capital gains tax. The minister announced an increase of the exempt gain from R2 000 000 to R 3000 000 for primary residence sold after 1 March 2026.
Sale of Business
A sale of business is ordinarily subject to capital gains tax. Under the current tax legislation capital gains from small businesses owned by persons over the age of 55 are only taxed when the gain from the sale is above R1.8 million provided the market value of the business does not exceed R10 million. The Minister has announced an increase from the R1,8 million threshold to R2,7 million if the market value of the business is not above R15 million.
Impact:
- A potential increase in sale of businesses by qualifying persons who were delaying sale due to fear of tax costs where the business qualifies for the capital gains tax exemption.
- The increase in the market value of businesses this benefit applies to from R10 million to R15 million should increase the number of transactions this provision applies to.
Investments
The Tax-Free Savings annual contribution limit increased to R46,000 in 2026/27 this was R36,000 in 2025/26.
Impact
- If you invest in a qualifying fund, the tax on your returns will be lower as non-taxable amount increased by R10,000.
Changes in Tax Tables
Inflationary adjustments to personal income tax bracket and rebates adjustments have been announced to compensate individuals for the effect of inflation.
Impact:
- If you earned R237 100 in 2025/26 tax year and still earn R237 100 in 2026/27 your tax saving from the change ignoring the impact of the medical aid tax rebate and other deductions will be R48,75 per month translating to a saving of R585 per annum.
- The saving is higher for higher income earners; for example if you earned R1,8 million and your remuneration remains the same you save R32 217 per annum saving R2688,81 per month. The table below demonstrates the impact on income brackets excluding those earning above R1,8 million per annum.
Tax Relief by 2025/2026 Tax Brackets
Value-Added-Tax ( VAT)
From 2009, businesses making taxable supplies of R 1 million per annum were required to register for VAT with voluntary registration set at minimum taxable supplies of R50 000.
The VAT compulsory registration threshold has increased to R2.3 million, and the voluntary registration threshold increased from R50 000 to R120 000.
Impact:
- Businesses with taxable supplies lower than the registration threshold of R2.3 million threshold may deregister from VAT if they do not wish to be registered under voluntary registration after this change is legislated and effective.
Excise Duties & Other Taxes
Excise duties on alcoholic beverages and tobacco products have increased by 3.4%. The general Fuel Levy has increased by 9 cents per litre for petrol and 8 cents per litre for diesel. The Road Accident Fund Levy has increased by 7 cents per litre for both petrol and diesel.
Carbon Tax
The Carbon Tax on fuel has increased by 5 cents per litre for petrol, and 6 cents per litre for diesel.
Other proposals
- Further consultation will take place during 2026 on the introduction of a national online gambling tax, including a proposal to impose a 20% tax on gross online gambling revenue.
- Government will publish draft regulations under the Currency and Exchanges Act to incorporate crypto assets into the capital flow management framework, signaling increased regulatory oversight of digital transactions.
Conclusion
The biggest win from the 2026/27 budget is the increase in the VAT registration threshold, this should reduce the cost of doing business for small businesses. A favorable tax environment alone however cannot encourage an increase in a number of start ups in RSA, other costs associated with starting a business/operating a small business should be assessed and equally revised.
If you would like to understand how these changes affect your tax position or business planning for 2026, please reach out to our experienced team.