Best news for South African taxpayers in years

The 2026 Budget delivered some of the best news for South Africa’s taxpayers in years, with the Treasury withdrawing planned tax hikes, providing inflationary relief and raising key thresholds to support individuals and businesses.

This was explained by Tax Consulting SA’s Partner and Head of Legal at Tax Consulting, Darren Britz, and Senior Tax Attorney, Richan Schwellnus.

“Budget Day 2026 may have lacked drama, but beneath the surface, it delivered a series of quietly positive tax developments,” Britz and Schwellnus said.

“Rather than introducing aggressive new revenue collection measures, the National Treasury opted for stability, targeted relief and structural adjustments that favour taxpayers, savers and small businesses.”

They noted that, in a year where additional tax increases of R20 billion had previously been pencilled in, the most notable policy decision was their withdrawal.

“This alone signals a meaningful improvement in fiscal confidence and a recognition that further tax pressure could have been economically counterproductive,” they said.

“Coupled with this, stronger-than-expected revenue performance, with gross tax revenue revised upward by R21.3 billion, has provided the government with the fiscal space to prioritise relief over new taxation.”

While the Budget has been described as “boring”, Britz and Schwellnus said the reality is that it is fiscally constructive.

The government has deliberately chosen predictability over shocks and relief over aggressive revenue extraction.

“Most importantly, taxpayers will receive inflationary relief for the first time in two years, with personal income tax brackets, rebates and medical tax credits fully adjusted for inflation,” they said.

“This directly protects individuals from bracket creep and prevents a silent increase in effective tax rates.”

Lower and middle-income taxpayers, in particular, are expected to benefit the most from these adjustments.

This reinforces the progressive design of the tax system while providing some breathing room in a high-cost-of-living environment.

Meaningful increases to key tax thresholds

Beyond the headline bracket adjustments, Britz and Schwellnus said Chapter 4 of the Budget Review reveals several underappreciated positives that materially improve the tax landscape.

The government has proposed far-reaching increases to tax thresholds and limits to promote entrepreneurship, savings and fairness across the tax system. Key examples include –

• VAT compulsory registration threshold increased from R1 million to R2.3 million
• Voluntary VAT registration threshold increased from R50,000 to R120,000
• Capital gains tax (CGT) primary residence exclusion increased from R2 million to R3 million
• Annual CGT exclusion increased from R40,000 to R50,000
• Tax-free investment annual limit increased from R36,000 to R46,000
• Retirement fund contribution deduction limit increased from R350,000 to R430,000
• Donations tax exemption for individuals increased from R100,000 to R150,000
• Turnover tax threshold for micro businesses significantly expanded

“These changes are not merely technical. They reduce compliance burdens for small businesses, incentivise savings and investment, and modernise thresholds that in some cases had not been adjusted for over a decade,” Britz and Schwellnus said.

“For entrepreneurs and growing businesses, especially, the higher VAT and turnover tax thresholds represent a meaningful easing of administrative pressure and potential cash-flow benefits.”

Britz and Schwellnus said another constructive signal is that the government has now achieved a third consecutive primary budget surplus, while maintaining fiscal discipline without resorting to major new tax hikes.

This aligns with the Treasury’s broader strategy to stabilise national debt levels, reduce borrowing costs and improve investor confidence.

“A stable fiscal framework, combined with predictable tax policy, is generally viewed more favourably by markets than sudden and surprise revenue-raising measures,” they said.

“Importantly, the decision to withdraw previously proposed tax increases was driven by improving fiscal metrics and concerns about the negative economic impact of additional tax burdens.”

Stronger SARS enforcement ahead

According to Britz and Schwellnus, the 2026 Budget documents also reflect a resilient tax administration environment.

“Higher-than-expected VAT, corporate income tax and dividends tax collections have supported the improved revenue outlook,” they said.

“At the same time, SARS continues to receive additional funding for modernisation, enforcement and data analytics, signalling that compliance enforcement will remain a key focus area.”

SARS has expanded its use of technology and targeted compliance initiatives, particularly in respect of high-net-worth individuals, large businesses and the digital economy.

They said this indicates that while the policy environment is becoming more stable, enforcement will likely become more sophisticated.

However, Britz and Schwellnus cautioned that despite the positive adjustments, structural risks remain for taxpayers.

“The personal income tax system continues to rely heavily on a narrow tax base, with a small percentage of taxpayers contributing a disproportionately large share of tax revenue collected by SARS,” they said.

“This reinforces the Treasury’s long-standing view that sustainable revenue growth will ultimately depend more on economic expansion and the broadening of the tax base, rather than on increasing tax rates.”

Finance Minister Enoch Godongwana also acknowledged ongoing economic constraints, including logistics inefficiencies, infrastructure weaknesses and municipal distress.

“These factors continue to weigh on growth and limit the scope for more aggressive tax relief,” Britz and Schwellnus said.

“Nonetheless, the resilience of the tax system, even in a weak growth environment, suggests improved administrative efficiency and stable underlying tax buoyancy.”

They reiterated that while the 2026 Budget is not a headline-grabber – with no surprise sweeping reforms and no major tax increases – that is precisely its strength.

“The withdrawal of planned tax hikes, full inflationary relief, substantial increases in key tax thresholds, and a stable fiscal framework collectively point to a more taxpayer-friendly and growth-conscious policy stance,” they said.

“In a volatile global and domestic environment, predictability, restraint and incremental relief may well be the most positive tax outcome South African taxpayers could have expected.”