Budget 2026: Slight relief for overburdened individual taxpayers

Government has remained true to its word to withdraw additional tax increases in the 2026 budget if collections perform in line with expectations. The previously proposed R20 billion tax increase for the 2025-’26 tax year is off the table. More good news for taxpayers: full inflationary relief from bracket creep and an inflationary increase in the medical tax credit and rebates.

This is the first time in two years that the government has provided relief to overburdened individuals. In the absence of this relief, individuals would have faced a “stealth” tax increase of almost R14 billion. Persistent pleas for increased tax thresholds found fertile ground, with a host of thresholds raised – some not adjusted in more than 25 years.

A major adjustment is an increase in the value-added tax compulsory registration threshold from R1 million to R2.3 million. Capital gains tax, as well as savings and retirement thresholds, have all been increased in line with inflation. Many of these increases are aimed at assisting small businesses and encouraging savings.

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National Treasury notes in the 2026 Budget Review that South Africa’s tax system performed well, despite challenging economic conditions. The gross tax revenue estimate for the 2025-26 tax year is revised up by R21.3 billion from the 2025 estimates, despite lower economic growth. However, the medium-term tax revenue outlook is revised down by R57 billion relative to the 2025 Medium-Term Budget Policy Statement.

This is primarily due to the withdrawal of the proposed R20 billion tax increases. Higher than expected value-added tax (VAT), corporate income tax and dividend tax collections improved the in-year outlook. VAT collections have been revised up from R482 billion to R487 billion, and company income tax has been revised up from R338.8 billion to R346.5 billion.

Provisional corporate tax collections have shown broad-based growth, other than in the manufacturing sector, where revenue declined. Corporate profitability increased steadily during 2025, with December 2025 mining tax collections up 29% on December 2024 owing to high platinum group metals and gold prices. Although the near-term benefit of the precious metals upswing is positive for the revenue outlook, the gains are expected to be lower than in the previous period of high commodity prices (2020/21 to 2022/23) as the current highs are occurring for a narrower set of commodities.

Dividend tax collections were boosted by large once-off collections from the mining and retail sectors and a recovery in corporate profits. Strong growth in collections from fuel importers drove overall fuel levy collections in 2025-26 after the sharp drop in demand in the previous year, when less diesel was used to keep the lights on. However, personal income tax collections are projected to fall short of 2025 budget estimates, reflecting subdued private-sector wage growth. It is revised down from R792.4 billion to R786.2 billion.

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