This year’s Budget Speech, delivered by the Minister of Finance on 25 February 2026, held many positive developments, which were good news for businesses and taxpayers of South Africa. The key change was that the government withdrew the R20 billion tax increase under consideration and provided some much-needed relief to various taxpayers.

However, it should be noted that the budget remains a proposal and must still be formally debated and voted on in Parliament.

In a nutshell, personal income tax brackets and medical tax credits will be adjusted for inflation for the first time in three years, there are no major tax hikes, and great support for small businesses.

SOME OF THE HIGHLIGHTED CHANGES ARE…

• The R20 billion tax increase has been withdrawn.
• The annual tax-free savings investment incentive has been increased from R36 000 to R46 000.
• Personal income tax brackets and medical tax credits will be fully adjusted for inflation.
• The retirement fund deduction limit increases from R350,000 to R430,000.
• The primary residence exclusion for CGT increases from R2 million to R3 million.
• Tax thresholds and limits are also adjusted for inflation to assist small businesses and encourage savings.
• Fuel levy increase of 9c/l for petrol and 8c/l for diesel.
• Road Accident Fund levy increases by 7c/l to R2.25/l from 1 April.
• The carbon fuel levy will increase to 19c/l for petrol and 23c/l for diesel from 1 April
• VAT: No change to the rate, however, greater support for small businesses with the registration threshold updated for the first time since 2009, from R1 million to R2.3 million.
• Corporate tax: No change
• Sugar tax: No change.
• Sin tax: Alcohol and tobacco increase by 3.4%

Some encouraging news is that South Africa obtained its first credit rating upgrade in 16 years and was removed from the FATF grey list. Revenue collections for 2025/26 have been revised upwards by R21.3 billion due to stronger VAT, corporate income tax and dividends tax collections.

The withdrawal of the R20 billion tax increase proposal, combined with inflation adjustments to personal income tax thresholds, means the overall tax burden for individuals and small enterprises will not increase materially. However, taxpayers should be aware that SARS continues to intensify compliance and enforcement activities, particularly in the areas of transfer pricing, trusts, cryptocurrencies, cross-border transactions and illicit trade.

Action Tips to Consider

• Review your tax planning strategy early in the year — don’t wait until filing season.
• Accurate bookkeeping and timely submissions are no longer optional, but critical.
• Make sure your business is registered under the most beneficial tax structure, so it does not miss out on tax relief.
• Review your payroll compliance to avoid any mistakes, as this is one of the most common audit triggers.
• Plan your cash flow around provisional payments, so you will not be caught off guard and under budgeted.
• Taxpayers with offshore crypto holdings must ensure these are properly disclosed.

If you need assistance reviewing your tax position, preparing financial statements, or ensuring full compliance with SARS requirements, Dirmeik Consulting is ready to support you — professionally, practically and proactively. You can find our latest Tax Guide here.

Let’s make this financial year one of clarity, compliance and growth.

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VAT (Value Added Tax)

Considering the impact of a VAT adjustment, VAT will be increased from 15% to 15.5% on 1 May 2025 and to 16% on 1 April 2026. More VAT zero-rated foods will be added to relieve poorer households, as will social grants be increased by more than the inflation rate. The fuel levy will also remain unchanged.

Transfer Duty

The Minister announced that the monetary thresholds for transfer duty will be adjusted upwards by 10% to counter inflation. As such, purchasing a property with an acquisition value of R1,210,000 or less will not attract the payment of transfer duty. This threshold adjustment, proposed to take effect on 1^st April 2025, will reduce the associated cost of purchasing property and attract more prospective buyers.

Personal income tax and medical tax credits

For the second year running, personal income tax brackets, individual rebates, and medical tax rebates remain unchanged and will not be adjusted for inflation.

Other taxes

Offering some relief to stressed taxpayers, the Minister did not propose increases to capital gains tax, dividends tax, estate duty, corporate income tax, or donations tax. However, the monetary thresholds for tax-free investments and interest income exemptions remain unchanged.

The carbon tax on fuel will increase by 3 cents. This effectively raises the petrol carbon tax from 11 cents to 14 cents per liter and from 14 cents to 17 cents in the case of diesel.

Increase of 6.75% in excise duties on alcoholic beverages.

6.75% rise in excise duties on cigars and pipe tobacco and 4.75% on cigarettes and other tobacco products.

Tax Rebates for Natural persons remain unchanged, as follows:

• Primary: R17 235
• Secondary (Persons 65 and older): R9 444
• Tertiary (Persons 75 and older): R3 145

Thresholds for Natural persons:

• Below age 65: R95 750
• Age 65 to below 75: R148 217
• Age 75 and over: R165 689

For further information on how this budget affects you personally or your business, contact Dirmeik Consulting today.

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Further bad news for companies, is that SARS will be implementing a global minimum corporate tax that will bring more business operations into the tax net, subjecting multinational companies to a tax rate of at least 15%, regardless of where its profits are located.

Some good news was that the expected VAT increase to 16% was not introduced and will remain at 15%.  There was also no increase to the general fuel levy, while the accident fund levy and the customs and excise levy will remain unchanged.  In 2026, producers of electric vehicles in South Africa will be able to claim 150% of qualifying investment spending, as an incentive to aid the transition to new energy vehicles.

Changes to the environmental taxes are as follows:-

• Carbon tax increased from R159 to R190 per tonne of carbon dioxide equivalent, as of 1 January 2024.
• Carbon fuel levy will increase to 11 cents per litre for petrol and 14 cents per litre for diesel effective from 3 April 2024.
• Plastic bag levy will increase from 28 cents a bag to 32 cents from 1 April 2024.
• Incandescent light bulb levy will rise from R15 to R20 per light bulb from 1 April 2024.

The brackets of the property transfer duty table also remain unchanged, providing no additional incentive to buyers, with properties below R1.1 million remaining exempt from the tax.

The budget also includes a hike in excise duties on alcohol of 6.7% to 7.2%, while duties on tobacco products will increase by 4.7% to 8.2%.  Godongwana also said they would be tabling an increase of the excise duty on electronic nicotine and non-nicotine delivery systems, known as vapes, to R3.04 per milliliter.

These changes to the budget are expected to grow South Africa’s economy over the next three years at an average of 1.6%. The government has said they would be prioritizing energy and logistics reforms, along with measures to arrest the decline in state capacity.

Rebates remain unchanged, as follows:-

• Primary – R17 235
• Secondary (Persons 65 years and older) – R9 444
• Tertiary (Persons 75 years and older) – R3 145

Age Tax threshold

• Below age 65 – R95 750
• Age 65 to below 75 – R148 217
• Age 75 and above – R165 689

Click here to see our in-depth Tax Guide for the 2024/2025 tax year that begins on 1st March 2024.

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