Two tax-free gifts for South African investors in the 2026 Budget

Finance Minister Enoch Godongwana has increased the annual limit for tax-free investments in South Africa for the first time since 2021.

Now, South Africans are afforded a tax-free investment limit of up to R46,000 per annum, up from R36,000 previously. The lifetime limit of R500,000 has remained unchanged.

In addition, the limit on retirement fund deductions was raised to R430,000 a year, allowing individuals to invest tax-free more each year.

In his Budget Speech delivered on Wednesday, 25 February, Godongwana explained that this is done in the hopes of encouraging South Africans to save more.

“Madam Speaker, our national savings and investment rate is far below the levels needed to truly create generational wealth and support local investment in the economy,” the minister said.

Therefore, the minister announced an increase in the tax-free investment limit and raised the retirement fund deduction limit from R350,000 to R430,000.

This, the minister said, will allow individuals to invest more each year on a tax-free basis.

Calls to raise tax-free investment limits have risen over the past few years, with economists and asset managers vocal proponents of an increase.

Prior to Godongwana’s 2026 Budget Speech, Old Mutual said it believes “the time has come for the government to refresh the limits”.

An increased annual limit, the finance giant said, would better reflect today’s economic realities and meaningfully improve long-term financial and retirement outcomes.

Old Mutual Personal Finance’s head of advice, Lizl Budhram, said that when used strategically alongside traditional retirement vehicles, tax-free investment accounts can play a critical role in helping individuals strengthen their retirement outcomes.

However, she said this is dependent on the framework allowing sufficient room for meaningful contribution limits.

Tax-free investment accounts were introduced on 1 March 2015, and were designed to incentivise savings and help shift South Africa’s chronically weak savings culture. 

Annual contribution limits have been adjusted over time from R30,000 initially, to R33,000 in 2018 and R36,000 in 2021.

However, the lifetime contribution cap has remained unchanged at R500,000 since inception.

“At the current limits, an investor contributing the maximum amount each year would reach the lifetime cap in approximately 14 years, which restricts the long-term usefulness of these accounts as complementary retirement savings vehicles,” Budhram said.

“Tax-free investment accounts were introduced with the right intent, but more than ten years on, the contribution limits need to better reflect the foundational objective behind their introduction.” 

“When used alongside retirement funds and preservation vehicles, these accounts allow investors to build tax-efficient savings that can supplement retirement income and provide flexibility later in life.”