Budgets usually arrive with a sense of unease, as many people brace for higher taxes or fewer incentives. This year’s Budget, however, delivered something refreshingly different. Budget 2026 is genuinely a good‑news budget.
The R20 billion in tax increases that had been widely expected were scrapped entirely, thanks to stronger‑than‑anticipated tax collections – particularly from VAT, company tax and dividends tax. In simple terms, government did not need to reach deeper into taxpayers’ pockets this year.
What does this mean for you? More importantly, how can these changes be used to strengthen your financial plan?
This budget opens up real financial planning opportunities, particularly in the areas of tax‑free investing, retirement contributions, estate and property planning and offshore flexibility. We will be reaching out where these changes may affect your personal plan, but if anything stands out in the meantime, please do not hesitate to get in touch.
Budget 2026 at a Glance
|
Item |
2025/26 | 2026/27 |
| TFSA annual limit | R36,000 | R46,000 |
| Retirement deduction cap | R350,000 | R430,000 |
| CGT annual exclusion | R40,000 | R50,000 |
| CGT death exclusion | R300,000 | R440,000 |
| Primary residence CGT | R2 million | R3 million |
| Retirement lump‑sum threshold | R247,500 | R360,000 |
| Living annuity commutation | R125,000 | R150,000 |
| Discretionary forex allowance | R1 million | R2 million |
Retirement Contributions: A Long‑Awaited Increase
For the first time in almost a decade, the tax‑deductible retirement contribution cap has increased, moving from R350,000 to R430,000 per year, or 27.5% of taxable income, whichever is lower. To reach the maximum deduction, taxable income would need to be approximately R1.56 million.
This increase applies across pension funds, provident funds and retirement annuities. If you contribute via an employer fund, you may need to notify payroll or HR if you wish to increase your monthly contribution. If you contribute to a retirement annuity, speak to your financial planner about adjusting your monthly debit order.
This change particularly benefits higher‑income earners who were previously capped at R350,000 and can now enjoy a larger tax deduction while strengthening long‑term retirement outcomes.
Tax‑Free Savings Accounts: A Meaningful Opportunity
From 1 March 2026, the annual TFSA contribution limit increases from R36,000 to R46,000 – the first increase since 2021. On a monthly basis, this means contributions can rise from R3,000 to approximately R3,833.
If you are not already maximising your TFSA, this is an ideal time to revisit your strategy. TFSAs are an excellent supplement to retirement funding, with the added benefit that you will never pay capital gains tax on the growth. For many existing investors, these accounts have already delivered significant long‑term tax savings.
Capital Gains Tax: More Breathing Room
Several CGT exclusions have been increased, providing welcome flexibility:
- Annual exclusion: R40,000 – R50,000
- Year‑of‑death exclusion: R300,000 – R440,000
- Primary residence exclusion: R2 million – R3 million
This is particularly relevant for clients considering downsizing, restructuring property portfolios or reviewing estate planning strategies. At the maximum marginal tax rate of 45%, the increase in the primary residence exclusion alone can translate into a CGT saving of up to R180,000 – a meaningful difference.
Offshore Investing and Travel: Greater Flexibility
The single discretionary allowance has doubled, increasing from R1 million to R2 million per calendar year.
This allowance covers offshore travel, gifts, investments, donations and remittances without requiring tax clearance. For clients with offshore exposure as part of their plan – or those supporting family abroad – this change offers significantly more flexibility and simplicity.
Personal Income Tax: Some Welcome Relief
After two years of frozen tax tables, personal income tax brackets and medical tax credits have finally been adjusted for inflation (3.4%).
Over the past two years, many people paid more tax without realising it, as even modest salary increases pushed income into higher tax brackets – a form of “stealth tax”. This adjustment effectively switches that off.
We will be reviewing cash‑flow and tax planning for clients who received inflation‑linked increases during this period, as there may be opportunities to redirect savings more efficiently.
Medical Aid Tax Credits: Small, but Helpful
Medical scheme tax credits have increased slightly:
- From R364 to R376 per month for the first two members
- From R246 to R254 per month for each additional member
For a family of four, this increases the monthly credit from R1,220 to R1,260. While not dramatic, every bit helps as healthcare costs continue to rise.
Retirement and Living Annuities: Practical Adjustments
From 1 March 2026, the retirement “de minimis” lump‑sum threshold increases from R247,500 to R360,000. Where a retirement annuity with a single provider falls below this amount, the full value may be withdrawn in cash at retirement, subject to the retirement fund withdrawal tax tables.
The living annuity commutation threshold also increases from R125,000 to R150,000. Once the value of a living annuity reaches this level, it may be fully commuted, with the withdrawal taxed at withdrawal rates rather than income tax rates.
Importantly, there is now clarity that the commutation threshold applies per fund or insurer, not per individual policy – a meaningful distinction for clients holding multiple annuities with the same provider.
One Important Watch‑Out: Donations Between Spouses
From 25 February 2026, the donations tax exemption between spouses applies only where both spouses are South African tax residents. If one spouse has emigrated or ceased tax residency, inter‑spouse donations may now trigger donations tax.
This is an area where proactive review is essential, particularly for clients with cross‑border considerations.
Annual Review Reminder
We encourage you to use this update as a checklist for your next annual financial planning review. With so many changes now in place, there are genuine opportunities to improve efficiency and strengthen your overall financial plan.
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