What the 2026/2027 Tax Changes Mean for South Africans and Businesses
South Africa’s 2026/2027 Budget brings a mix of stability and change. Headline tax rates remain largely unchanged, yet the Treasury signalled a tightening of compliance and important adjustments to thresholds, rebates and allowances. To help our clients navigate these changes confidently, Bonakude has prepared a concise summary of the 2026/2027 Tax Guide and a practical discussion of what the Budget means for individuals and businesses.
Nelisiwe Ndlovu-Bulose RGA, AGA(SA), Executive: BPO at Bonakude
Key Personal Income Tax Updates for 2026/2027
Updated Tax Brackets and Rebates
The Budget adjusts personal tax brackets to give relief from inflation. For the tax year ending 28 February 2027, income up to R245 100 is taxed at 18%. The top marginal rate of 45% applies to income above R1 878 600. Tax rebates have increased slightly, with the primary rebate now R17 820, the secondary rebate (age 65–74) R27 585, and the tertiary rebate (75 years and older) R30 834.
Tax thresholds also rise: individuals under 65 pay tax only once taxable income exceeds R99 000, while those aged 65–74 pay tax from R153 250 and those aged 75 or older from R171 300. These thresholds provide relief for pensioners and low-income earners.
Medical Tax Credits and Contributions
Medical scheme fees tax credits have been increased: the main member credit rises to R376 per month, R752 for a member plus one dependent, and R1 006 for two dependants. Additional medical expenses credits remain available, offering 33.3% of qualifying expenses to individuals aged 65 or older, or those with a disability, and 25% for others, with limits tied to taxable income.
Interest and Investment Exemptions
Interest from South African sources remains exempt up to R23 800 for individuals under 65 and R34 500 for those aged 65 or older. The annual tax-free investment limit increases from R36 000 to R46 000, reflecting the government’s drive to encourage household savings. Importantly, the donations tax exemption rises from R100 000 to R150 000, offering more flexibility for estate and wealth planning.
Retirement Fund Contributions and Capital Gains Relief
The deductible contribution limit to retirement funds increases from R350 000 to R430 000 or 27.5% of taxable income, whichever is lower. Contributions above the limit may be carried forward to future years. The primary residence capital gains tax exclusion jumps from R2 million to R3 million, and the annual CGT exclusion for individuals increases to R50 000. These changes provide significant relief for property owners and investors.
Provisional Tax and Tax-Free Investments
A provisional taxpayer is any person earning non-salary income or remuneration from an unregistered employer. Individuals who do not carry on business and whose taxable income does not exceed the tax threshold, or whose interest, dividend, and rental income is R30 000 or less, need not submit provisional returns. Investments in tax-free instruments are capped at R46 000 per year, and income and capital gains from such investments are fully exempt.
Business and Corporate Tax Highlights
Corporate and Trust Tax Rates
Corporate income tax remains 27% for years of assessment ending after 31 March 2023. Trusts, other than special trusts, continue to be taxed at 45%. Dividend tax remains at 20% on dividends paid after 22 February 2017.
Turnover Tax for Micro-Businesses
The turnover tax system for micro-businesses has been simplified. For the 2026/2027 year, the tax is nil on turnover up to R600 000, 1% on turnover between R600 001 and R950 000, 2% on turnover between R950 001 and R1 400 000, and 3% on turnover between R1 400 001 and R2 300 000. These thresholds encourage small-business growth and simplify compliance.
VAT Registration Thresholds and Other Proposals
The Budget increases the compulsory VAT registration threshold from R1 million to R2.3 million, and the voluntary registration threshold from R50 000 to R120 000. This change reduces compliance burdens for small businesses and aligns with inflation. A new 20% tax on gross gambling proceeds is proposed, and legislation is expected during the forthcoming budget cycle. Other proposals include limiting the spousal donation exemption to donations between resident spouses.
Fringe Benefits and Allowances
Employers should review PAYE calculations for fringe benefits carefully.
- Employer-owned vehicles: The taxable value is 3.5% of the vehicle’s determined value per month, or 3.25% if the vehicle is subject to a maintenance plan. PAYE must be withheld on 80% of the fringe benefit, although this may be reduced to 20% if the employer is satisfied that at least 80% of usage is for business. On assessment, the benefit may be reduced by proven business kilometres and costs borne
by employees. - Interest-free or low-interest loans: The difference between the official rate and the actual interest charged is taxable.
- Residential accommodation: The taxable value is the lower of a prescribed formula or the employer’s actual cost.
- Subsistence and travel allowances: When employees spend at least one night away on business, amounts of R595 per day for meals and incidental costs, or R184 per day for incidental costs only, are deemed expended. Travel allowances require logbooks and PAYE withholding on 80% of the allowance.
Budget Trends: Compliance and Cross-Border Considerations
While headline rates remain stable, Treasury’s 2026/2027 Budget emphasises tighter compliance and modernisation. Baker McKenzie notes that the Budget introduces VAT reform, standardised filing rules, and tighter requirements for second-hand goods to create a more uniform and fraud-resistant system. Cross-border regulation is also evolving: crypto assets are brought into the exchange-control framework, interest rate caps on inward loans are removed, and the single discretionary allowance for individuals doubles to R2 million. Taxpayers should strengthen internal controls and documentation to navigate SARS’s increasingly data-driven compliance environment.
What These Changes Mean for You
For Individuals
- Plan for retirement and savings by taking advantage of the higher retirement contribution limit and the increased tax-free investment allowance. Review your investment portfolio and consider using tax-free instruments to build wealth.
- Update your tax planning by ensuring your payroll provider or accountant applies the new tax brackets and rebates. Keep receipts for medical expenses and maintain logbooks for travel allowances.
- Consider estate and asset planning opportunities created by the increased primary residence exclusion and annual donations exemption for more tax-efficient wealth transfer and property disposals.
For Businesses and Trusts
- Review your VAT registration status. If your turnover falls below the new compulsory threshold, you may choose to deregister. If you are approaching the threshold, plan your cash flow accordingly. Voluntary registration may still be beneficial if input VAT claims outweigh compliance costs.
- Comply with fringe benefit rules by verifying that employer-provided vehicle and other benefit values are correctly calculated and substantiated by logbooks. Update policies for interest-free loans and residential accommodation where necessary.
- Businesses in the gaming sector should prepare for the proposed 20% tax on gross gambling proceeds.
How Bonakude Can Help
At Bonakude, we provide specialist accounting services including financial accounting, tax compliance, company secretarial services, and business process outsourcing. Our experienced team can help you with the following:
- Prepare accurate financial statements and management accounts.
- Optimise cash flow through budgeting and cash-flow forecasts.
- Ensure tax compliance, including returns, clearances, SARS queries, objections, and appeals.
- Navigate company registrations and CIPC filings.
- Outsource your accounting, tax, HR, and payroll functions.
Our holistic approach allows you to focus on running your business while we handle the regulatory complexities. Contact us to discuss how the 2026/2027 tax changes affect your circumstances and to develop a tailored compliance strategy.
Frequently Asked Questions (FAQs)
The Budget places strong emphasis on tighter compliance and modernisation. SARS is operating in a more data-driven environment, which means individuals and businesses should strengthen their record-keeping, internal controls, and tax processes to stay compliant and avoid unnecessary risk.