Budget 2026: what changed, and what it means for your tax bill

The 2026 Budget was delivered on 25 February 2026. Two changes matter more than the rest: personal income tax brackets were adjusted for inflation for the first time in three years, and the VAT registration thresholds moved for the first time since 2009.

Personal income tax

Brackets and rebates were increased by 3.4%, in line with inflation. Since 2023/24 they had been left unchanged, which meant that any salary increase pushed more income into higher brackets — an effective tax increase without a rate change.

The top marginal rate remains 45%, and trusts other than special trusts continue to be taxed at a flat 45%.

Medical scheme credits

The medical scheme fees tax credit increased to R376 a month for the main member and the first dependant, up from R364, and to R254 a month for each additional dependant, up from R246.

VAT

The rate stays at 15%. The registration thresholds, however, moved substantially with effect from 1 April 2026:

• Compulsory registration: from R1 million to R2.3 million
• Voluntary registration: from R50 000 to R120 000

This is the most significant change for small businesses in the Budget. Businesses currently registered but turning over less than R2.3 million may apply to deregister — though there is an exit charge on assets, and deregistering is not automatically the right answer.

Turnover tax

The turnover tax regime for micro businesses was expanded in line with the VAT change. The annual turnover limit rose from R1 million to R2.3 million, and the tax-free band within the regime increased from R335 000 to R600 000.

Turnover tax replaces income tax, capital gains tax and dividends tax with a single annual payment calculated on gross turnover. It is simpler, but because it is charged on turnover rather than profit it favours businesses with healthy margins.

Capital gains tax

The primary residence exclusion increased from R2 million to R3 million. For homeowners selling a long-held property this is a meaningful change, and it partly restores an exclusion that inflation had eroded.

Corporate tax

The corporate income tax rate remains 27%, and the limitation on the use of assessed losses stays in place.

What to do about it

Payroll. New tax tables applied from 1 March 2026. If you run payroll in-house, confirm your software was updated for the new tax year.

VAT. If your turnover is under R2.3 million and you are registered, the deregistration question is worth a proper look — including the exit charge on assets on which input tax was claimed.

Small businesses under R2.3 million. Compare turnover tax against the normal system on your actual margins before assuming the simpler option is cheaper.

Retirement contributions. The 27.5% deduction, capped at R350 000, is unchanged. With brackets adjusted upward, the value of the deduction shifts slightly for taxpayers near a bracket boundary.

These proposals were announced on 25 February 2026 and remain subject to Parliament's legislative process. SARS confirmed it would administer the VAT registration threshold changes from 1 April 2026 ahead of promulgation. For anything material, take advice on your own position before acting.