Budget Speech 2026: R20b VAT hike withdrawn, but sin taxes and fuel levies climb

The 2026 Budget Speech has given taxpayers some relief as Finance Minister Enoch Godongwana announced that government has withdrawn the R20b tax increase for Value Added Tax (VAT). SANewsreportsthat, tabling the 2026 Budget in Parliament today, Godongwana explained that the withdrawal was due to the tax system demonstrating resilience despite slow economic growth. “For 2025/26, the gross tax revenue is revised up by R21.3b 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, the government has decided to withdraw the R20b 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,” the minister said.

Government is 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. “Our national savings and investment rate is far below the levels needed to truly create generational wealth and support local investment in the economy,” he said. To encourage South Africans to save more, government had proposed that the tax-free annual investment limit be increased from R36 000 to R46 000 per year.

[paywall]

Furthermore, the limit to retirement fund deductions should be raised from R350 000 to R430 000, allowing individuals to invest more each year on a tax-free basis. Consumers can expect to pay more for tobacco, alcohol and petrol from April 1. “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 published bySAnews, all social grants, except the Covid-19 Social Relief of Distress (SRD) grant, will increase in the next financial year. “Social grants constitute the largest share of spending on social development.

Excluding the [SRD] grant, spending increases from R246.6b in 2025/26 to R276.5b in 2028/29. The SRD grant is allocated an additional R36.4b to extend payments until March 31, 2027, at the current R370 per month, per beneficiary.

[/paywall]