The 2026 National Budget has delivered encouraging news for taxpayers and businesses alike. Instead of the previously proposed R20 billion in tax increases, government has opted for tax relief measures that aim to support households, stimulate business activity and encourage long term savings.

This shift has been described by National Treasury as a meaningful fiscal turning point for South Africa, with improving economic indicators and renewed confidence in the country’s financial outlook.

Positive Economic Signals

South Africa’s economic outlook is showing signs of improvement. Real GDP growth is projected at around 1.4% in 2025, with expectations that it could rise to 2% by 2028. Government debt is also expected to stabilise during the current financial year before gradually declining.

Inflation has eased to 3.2% in 2025, down from 4.4% in 2024. Lower inflation improves affordability for households and helps keep interest rates under control. Progress in economic reforms has also strengthened investor confidence, contributing to a sovereign credit rating upgrade and reduced borrowing costs for the country.

No Increase in Income Tax or VAT

One of the most welcome announcements is that government has withdrawn the planned tax increases. This means there will be no increase in VAT and no increase in income tax for either individuals or companies.

Instead, taxpayers will benefit from inflation related adjustments across several tax measures.

Personal Tax Relief Returns

For the first time in two years, personal income tax brackets have been fully adjusted for inflation. This means taxpayers will retain slightly more of their income in real terms.

The tax threshold for individuals under the age of 65 increases to R99 000. Medical tax credits will also increase from R364 to R376 per month for the first two members, and from R246 to R254 for additional dependants.

Other tax limits and rebates have also been adjusted for inflation, including those related to retirement contributions and tax free investments.

Incentives to Encourage Saving

Government has introduced several adjustments aimed at encouraging South Africans to save more.

The annual contribution limit for tax free savings accounts increases from R36 000 to R46 000. In addition, the cap on deductible retirement fund contributions rises from R350 000 to R430 000 per year.

These changes offer taxpayers greater opportunities to build long term financial security while benefiting from tax advantages.

Capital Gains Tax Adjustments

The annual capital gains tax exclusion for individuals and special trusts will increase from R40 000 to R50 000. For individuals in the year of death, the exclusion rises from R300 000 to R440 000.

Another significant change applies to property owners. The capital gains exclusion on the sale of a primary residence will increase from R2 million to R3 million, offering meaningful relief for homeowners planning to sell.

Corporate and Small Business Support

The corporate income tax rate remains unchanged at 27%.

New global minimum tax rules will be implemented from the 2026/27 financial year. These rules aim to limit profit shifting by multinational companies and are expected to raise approximately R2 billion in revenue.

Small businesses also benefit from several supportive measures. The VAT registration threshold increases from R1 million to R2.3 million from 1 April 2026, reducing administrative pressure for smaller enterprises.

In addition, capital gains tax relief on small business asset disposals increases, with exemptions now applying to transactions of up to R15 million.

The annual turnover threshold for the turnover tax system will also increase from R1 million to R2.3 million, making this simplified tax regime accessible to more small businesses.

Excise Duties and Fuel Levies

Excise duties on alcohol, tobacco and vaping products have increased by 3.4% in line with inflation.

Fuel levies will also rise from 1 April, including increases to the general fuel levy, Road Accident Fund levy and carbon tax levy. However, customs and excise duties on fuel itself remain unchanged.

Government is also considering the introduction of a national online gambling tax of 20% on gross revenue, which will undergo further consultation during 2026.

Additional Tax Proposals

For individuals investing offshore, the single discretionary allowance has been increased from R1 million to R2 million per year.

The Budget also proposes that returns from certain collective investment schemes and retail hedge funds be taxed as capital gains rather than income, a move designed to support savings and provide greater certainty for the investment industry.

Planning for the New Tax Year

With these changes and additional technical amendments being introduced, the 2026 Budget will affect taxpayers and businesses in a variety of ways.

Professional advice can help ensure that you understand the impact on your financial position and take advantage of the available tax benefits.

At BGR, our team is ready to assist you in navigating the new tax year and aligning your financial and tax strategies with the latest developments.