Budget Speech 2026Revenue Trends and Outlook |
Madam Speaker, over the past three years, our tax system has demonstrated resilience despite slow economic growth.
For 2025/26, the gross tax revenue is revised up by R21.3 billion compared to the estimate in the 2025 Budget.
Higher-than-expected net VAT, corporate income tax and dividends tax collections, improved the in-year outlook.
As a result, government has decided to withdraw the R20 billion in tax increases provisionally included in the May 2025 Budget.
The improving fiscal position allows us enough room to withdraw the proposed tax increases, without putting fiscal sustainability or economic activity at risk.
We are also proposing additional tax measures to ease the financial burden on households and businesses, by adjusting personal income tax brackets and rebates fully in line with inflation.
Madam Speaker, our national savings and investment rate is far below the levels needed to truly create generational wealth and support local investment in the economy.
To encourage South Africans to save more, we propose that:
| • | The tax-free annual investment limit be increased from R36 000 to R46 000 per year. |
| • | The limit to retirement fund deductions be raised from R350 000 to R430 000, allowing individuals to invest more each year on a tax-free basis. |
Madam Speaker each year we ask South Africans to send in their “Tips for the Budget”. This year more than 1,200 citizens sent us their opinions and suggestions.
Renette Oosthuizen, a small business owner from Gauteng, had this tip:
“Minister Godongwana, please increase the VAT registration threshold for small businesses to R2 million. The R1 million threshold has not kept pace with the cost of doing business.”
Renette, you will be happy to know that in this budget the compulsory VAT registration threshold increases from R1 million to R2.3 million.
We are taking other measures to support small businesses:
| • | We are raising the capital gains tax exemption for the sale of a small business for older persons from R1.8 million to R2.7 million. This applies to small businesses worth R15 million instead of the R10 million previously. It will enable small business owners to receive more tax relief when they sell their businesses. |
Madam Speaker, increases to certain taxes are unavoidable.
For 2026/27, excise duties on tobacco will be increased in line with inflation.
This includes excise duty on electronic nicotine and non-nicotine delivery systems.
As a result:
| • | The tax on a 20-pack of cigarettes rises from R22.81 to R23.58. |
| • | Pipe tobacco rises by 28 cents per 25 grams, and cigarette tobacco by 87 cents per 50 grams. |
| • | Cigars rise by R4.56 per 23 grams. |
The excise on alcoholic beverages also rises by inflation.
As such:
| • | A 340 millilitre can of beer or cider increases by 8 cents. |
| • | A 750 millilitre bottle of wine goes up by 15 cents. |
| • | A 750 millilitre bottle of spirits will increase by R3.20. |
In terms of fuel levies, the total increase will also be in line with inflation.
| • | The general fuel levy will go up by 9 cents per litre for petrol and 8 cents per litre for diesel. |
| • | The carbon fuel levy will go up by 5 cents per litre for petrol and 6 cents for diesel. |
| • | The Road Accident Fund levy will increase by 7 cents per litre. |
Honourable Members, the strong revenue collection this year, and the overall resilience of tax administration, reflects an efficient and agile tax administration, continually improving through targeted compliance initiatives.
However, the scourge of illicit trade represents a major threat to these hard-won gains. It threatens our economy, endangers consumers, and robs the fiscus of billions in revenue.
The recent announcement by a major tobacco producer, that will close its local operations, is a stark reminder of the impact of illicit trade on jobs and the overall economy.
The sophisticated and organised nature of illicit operations demands an intensified effort to curb this trade, secure prosecutions and dismantle its supply chains.
SARS has already intensified its efforts. It will also continue its joint operations with the Border Management Agency, the SAPS and the defence force to stop the illicit trade in tobacco.