• The government plans tax adjustments and incentives to ease pressure on households and businesses.

• Tax-free savings limits and retirement deduction caps will increase to encourage long-term investment.

• The VAT registration threshold for small businesses will more than double to reduce administrative burdens.

South Africa’s finance minister, Enoch Godongwana, unveiled a series of tax measures aimed at easing financial pressure on households and businesses, including inflation-linked adjustments to income tax brackets and deductions.

Presenting the 2026–2027 budget on February 25 Godongwana said the country’s national savings and investment rate remains below the levels needed to build long-term wealth and sustain domestic investment.

To encourage South Africans to save more, the government plans to raise the annual tax-free investment limit from 36,000 rand to 46,000 rand. The cap on tax-deductible retirement contributions will also increase from 350,000 rand to 430,000 rand, allowing individuals to set aside more money each year without tax penalties.

The budget also introduces relief for small businesses. The mandatory value-added tax (VAT) registration threshold will rise from 1 million rand to 2.3 million rand, a move intended to reduce administrative requirements for smaller firms.

In addition, the government plans to expand capital gains tax relief for older business owners selling their companies. The exemption will now apply to businesses valued at up to 15 million rand, up from the previous limit of 10 million rand, according to the finance minister.

The measures come as South Africa’s macroeconomic indicators show signs of improvement. Economic growth is expected to reach about 1.6% in 2026, compared with 0.4% in 2024.

Inflation has also eased slightly. Consumer price inflation stood at 3.5% in January 2026, down from 3.6% in December 2025, supported by stable food prices and lower fuel costs.

Data from Statistics South Africa (Stats SA) shows that households report their financial situation as slightly better than it was a decade ago. Still, many say their incomes remain insufficient to cover everyday needs.

Lower inflation could help reduce operating costs for small and medium-sized businesses and ease pressure on input prices. That could create a more favorable environment for investment and hiring at a time when unemployment has begun to decline.

South Africa’s unemployment rate fell to 31.9% in the third quarter of 2025, down 1.3 percentage points from the previous quarter, according to Stats SA.

Lydie Mobio