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Following the 2026 Budget Speech by Finance Minister Enoch Godongwana, the landscape for middle-market organisations and individuals is shifting. It is crucial to understand exactly what these changes mean for you and your organisation.
Our Tax Director, Neil Hughes, has reviewed the speech to provide a clear summary of the key tax elements.
We are committed to helping you navigate regulatory change with confidence.
Budget Speech 2026 – Tax Highlights
Finance Minister Enoch Godongwana’s 2026 Budget Speech marks a definitive fiscal turning point for South Africa, signalling a transition from stabilisation to renewed economic resilience. Following a challenging five-year period defined by state capture, the pandemic, and grey listing, the government’s commitment to reform has successfully stabilised debt and narrowed the budget deficit.
These improvements, alongside a credit rating upgrade and removal from the FATF grey list, have restored credibility to public finances. Consequently, the government has withdrawn the R20 billion in provisional tax increases proposed in May 2025, leveraging stronger-than-expected revenue collections to introduce tax measures that ease pressure on households and middle-market organisations. Read our full article for a detailed breakdown of these significant proposals.
Tax Proposals
The following is a summary of selected tax proposals included in the 2026 Budget:
Adjustment of personal income tax brackets – For the first time since 2023/24, the personal income tax brackets will be adjusted in line with the indicated inflation levels. Coupled with this is an increase in the tax rebates. This will result in the tax threshold for a natural person, under the age of 65 years, rising to R99 000. The highest marginal tax bracket will still levy tax at the rate of 45%, with that bracket becoming effective for taxable income in excess of R 1 817 000.
Medical tax credits – The medical tax credit for qualifying contributions to a medical scheme is being increased. For the principal member and first dependent, the credit increases from R364 to R376 per month, and for additional dependents, the credit increases from R246 to R254 per month.
Global minimum tax update – The updated tax rules will be implemented in the 2026/27 period. These rules are expected to reduce profit shifting by multinational entities, resulting in estimated revenue collections of R2 billion in the first year.
Diamond export levy – In an effort to encourage diamond producers to sell unpolished stones to local cutters and polishers, a 5% levy is proposed on the value of unpolished diamonds released for export. There may be an exemption if the local producer meets local sales requirements.
Special economic zones – Qualifying companies in a SEZ benefit from a reduced corporate rate of tax. To prevent companies from shifting profits to connected persons in a SEZ, companies are disqualified if more than one-fifth of the expenditure or gross income arises from transactions with connected persons outside the zone. These strict rules may not be appropriate in all circumstances, so government proposes a different approach by assessing whether companies are buying or selling products to connected persons outside the zone at market related prices to ensure that profits are not shifted into the low-tax zone.
VAT registration thresholds – With effect from 1 April 2026, the compulsory VAT registration threshold will be raised from supplies of R1 000 000 to a proposed value of supplies of R2 300 000. The voluntary VAT registration threshold will be raised from R50 000 to a new value of R120 000.
Capital gains tax – The exclusion applicable to a gain or loss on the disposal of a primary residence will be increased from R2 000 000 to R3 000 000. The annual exclusion applicable to natural persons or special trusts will be increased from R40 000 to R50 000. In the year of death, the CGT exclusion is to be increased from R300 000 to R440 000. The exclusion from CGT for a small business disposed, may apply to a business with a market value not exceeding R15 000 000 (previously R10 000 000). The small business exclusion from CGT is increased from R1.8 million to R2.7 million.
Savings and retirement – As an incentive to promote personal savings, the limit on the annual contributions to a Tax-free investment is increased from R36 000 to R46 000.
The limit for tax deductions in respect of retirement fund contributions is increased from R350 000 to R430 000.
The de minimis threshold for annuitisation of a retirement interest is increased from R247 500 to R360 000, whilst the threshold for commutation of a living annuity is increased from R125 000 to R150 000.
Donations tax – The exemption from donations tax, for donations by a natural person, is increased from R100 000 to R150 000 per annum. The exemption applicable to donations by juristic persons is increased from R10 000 to R20 000 per annum.
Tax-exempt employment benefits – Please refer to the following summary of revisions to employment-related exemption benefits:
Turnover tax regime – Qualifying entities were previously required to have a February year end to participate in the Turnover tax regime. That restriction is removed to make it more attractive. In addition, the qualifying turnover threshold is being increased from R1 000 000 to R2 300 000.
Updates and other matters under consideration
Update to urban development zone tax incentive review – Government will explore targeting the incentive to better support affordable housing developments in areas that are close to jobs, public transport, and essential services. The aim is to table proposals in the 2027 Budget.
Collective investment schemes – Further to public consultation after the publication of the discussion paper on CIS taxation in 2024, the National Treasury will be releasing a response document with revised proposals for further consultation.
The draft recommendation proposes that all investment returns generated by a regular CIS or retail investment hedge fund be taxed as capital. This is intended to encourage savings and provide certainty to the industry on the tax treatment of the savings vehicle.
The government proposes to exclude qualified investment hedge funds that are not open to the general public from the CIS tax regime. Alternative tax regime options for such funds will be proposed.
National online gambling tax– The discussion paper published in November 2025 proposed a tax of 20% on gross gambling revenue generated by online gambling. This tax would be in addition to the current taxes paid to provinces. Consultation on responses is still to be conducted, following which draft legislation will be made available for public comment later in 2026.
Additional policy and administrative amendments
Individuals, employment and savings
Allowing rollover treatment of capital allowances on allowance assets transferred between spouses - It is proposed that section 9HB be amended to prevent the recoupment of capital allowances on the transfer of allowance assets between spouses and to provide for the carry-over of accumulated allowances to the transferee spouse.
Limiting the donations tax exemption rules where a spouse ceases to be a tax resident - Section 56 of the Income Tax Act exempts donations between spouses from donations tax. The government has become aware of avoidance arrangements abusing the exemption. It is proposed that the donations tax exemption rules applicable to spouses be limited to donations made to a spouse who is a resident, effective from 25 February 2026.
Business - General
Withdrawing the proposal to align the two different interest limitation rules – The 2024 Taxation Laws Amendment Act included amendments to align the formula contained in the rules that limit interest deductions in terms of section 23N of the act with changes that had been introduced to section 23M of the act (formula applicable to interest in respect of debts owed to persons not fully subject to tax). Concerns have been raised that the proposed alignment in section 23N of the act, with an effective date of 1 January 2027, is not necessary given the distinct nature of the rules and transactions to which sections 23M and 23N of the act respectively apply. It is proposed that the 2024 amendment to align the formulas be withdrawn.
Tax administration – Income Tax Act
Excluding certain exempt entities that are companies from the definition of “provisional taxpayer” - In terms of paragraph (b) of the definition of “provisional taxpayer”, any company is a provisional taxpayer. It is thus proposed that fully exempt entities and certain partially exempt entities, which are regarded as companies, should also be excluded from being classified as provisional taxpayers.
Reviewing penalty regime for underestimation of provisional tax - If the taxpayer submits an estimate that is within the acceptable tolerance to avoid underestimation, but pays no provisional tax, the underestimation penalty cannot be imposed. The only penalty applicable in these instances is the lesser late payment penalty. It is proposed that, with effect from 25 February 2026, the timely payment of the amount of the estimate be required before it may be relied on. There are existing rules to ensure that there is no duplication of the underestimation and the late payment penalties.
Furthermore, the R1 million cap for relying on amounts based on historical assessments, rather than current estimates, will be increased to R1.8 million for years of assessment commencing on or after 1 March 2026.
Interest relief on defaults disclosed during voluntary disclosure application - The Constitutional Court held that it is not possible to combine a voluntary disclosure application with a request for remission of interest under the various tax acts without legislative authority to this effect. It is proposed that provision be made to specifically permit applicants for voluntary disclosure relief to simultaneously apply for the separate remission of interest, under the provisions of the relevant tax act, in respect of the defaults disclosed in the voluntary disclosure application. It is further proposed that this amendment take effect from 1 March 2026 to assist potential applicants without affecting existing applications.
