The South African government tabled the year 2026 budget speech by the Minister of Finance, Enoch Gondongwana on 25 February 2026
1. The budget deficit – the difference between government revenue and spending – has narrowed, and debt-service costs are also falling. But in 2026, the government will still have to spend R432.4-billion on debt repayments and interest.
2. Although the government will have to borrow money to fund the budget shortfall, the amount borrowed in 2026 will decrease to R380-billion, from R563-billion in 2025.
3. The economy is expected to grow by 1.6% in 2026 (taking inflation into account), up from an estimated 1.4% in 2025. Inflation is expected to be around 3.4% this year.
4. Thanks to higher-than-expected revenue in 2025, a plan to increase income taxes to collect an extra R20-billion has been scrapped. And for the first time since 2024, income tax brackets and rebates will be increased in line with inflation, which means people will not have to pay more tax if their salaries and wages increase by inflation.
5. But excise duties on tobacco and alcohol go up in line with inflation. This means tax on a 20-pack of cigarettes rises from R22.81 to R23.58, and tax on a 340 millilitre can of beer or cider increases by 8c
6. Fuel levies also go up in line with inflation. For instance, the general fuel levy will go up by 9c a litre for petrol and 8c a litre for diesel.
7. People will be encouraged to save more through an increase in the annual tax-free savings account contribution limit to R46,000 from R36,000. The limit to retirement fund deductions will also be raised from R350,000 to R430,000, allowing people to invest more in their retirement, on a tax-free basis.
8. Small businesses will only be required to register for VAT when their turnover exceeds R2.3-million. Previously, the threshold was R1-million.
Impact: Less paperwork. Lower compliance costs. More room to grow.
Reduced accounting and administrative burden. Improved cashflow.
9. About 60% of the government’s main budget of R1.95-trillion will be spent on what the government calls the “social wage”, which includes education, healthcare, and social grants.
10. R26-billion will be allocated to the HIV/AIDS programme over the next three years, to prevent mother-to-child transmission and provide antiretroviral medicines.
Personal Income Tax Brackets and Relief
In contrast to 2025, personal income tax brackets and rebates have been adjusted for inflation for the 2026/27 tax year (effective 1 March 2026).
The Tax table is attached below
https://www.sars.gov.za/?s=Tax+table+
Updated SARS per-kilometre cost table applies for 2026/27 (vehicle value bands adjusted accordingly).
SARS log book – download here https://www.sars.gov.za/wp-content/uploads/Docs/Logbook/2025-26-SARS-eLogbook.pdf
What This Means for You
For employers and payroll administrators, the 2026 Budget means:
Updated PAYE calculations due to bracket and rebate adjustments.
Increased subsistence and reimbursive travel limits.
Continued compliance requirements for SDL (1%) and UIF (1% employer / 1% employee).
No change to corporate income tax (remains 27%).
For employees, inflation adjustments reduce bracket creep and provide marginal relief.
For small businesses, the higher VAT threshold and turnover tax structure continue to support growth and ease administrative burdens.
High Level Summary (2026/27):
Medical Aid
Medical Aid Tax Credits increased to:
R376 for each of the first two dependants
R254 for each additional dependent
Subsistence Allowance
Meals and incidental costs: R595 per day
Incidental costs only: R184 per day
Companies
Corporate income tax remains at 27%.
Value-Added Tax (VAT) Adjustments.
There is no change to the VAT rate, which remains at 15%.Other Topical Changes
SARS interest rates (from 1 March 2026): Late or underpayment of tax: 10.25% p.a., Refund of overpayment of provisional tax: 6.25% p.a.
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Registered Accountant and Certified Tax Practitioner.
Matsobanemetja Business Consulting (Pty) Ltd is your accounting partner that you can entrust with the bookkeping function, right up to financial reporting. We helps you keep accurate records of your business finances.
We have well trained and qualified staff that manages the aspect of both business and individual taxes.
We are the fast growing accounting service-providing agency in South Africa and across the globe.
If you need a consultation with us with regards to your business, any type of business – please reach out to us by email hello@matsobanemetja.blog
Matsobanemetja Business Consulting (Pty) Ltd offers a wide range of bookkeeping and accounting services, tailored to your business needs at an affordable price.
You may please inquire with us by sending an email to enquiries@matsobanemetja.co.za
A budget tells us what we can’t afford, but it doesn’t keep us from buying it.”
— William Feather
Matsobanemetja Business Consulting Pty Ltd 