Tax Guide 2026/ 2027.
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2026 Budget Speech: Fiscal Policy.
South Africa’s 2026 Budget highlights government’s spending priorities over the medium term, emphasising the need to balance fiscal sustainability with continued investment in public services and infrastructure. A significant share of consolidated government spending continues to be directed toward social services, which account for around 60% of non-interest expenditure over the medium term. This includes spending on education, health, social development and community development. These allocations reflect government’s continued focus on addressing poverty, inequality and unemployment while maintaining core public services.
Within this, learning and culture remains the largest spending function, receiving about 24% of total consolidated expenditure, followed by social development at around 21%. Social development spending includes funding for social grants and other income support programmes that provide a critical safety net for millions of South Africans. Health services account for roughly 13% of total expenditure, supporting hospitals, clinics and broader public health programmes.
Infrastructure investment also remains a priority in the 2026 budget. Government plans to allocate over R1 trillion to public infrastructure over the medium term, with spending directed toward key sectors such as electricity, water, transport and logistics. These investments are intended to improve service delivery while addressing major constraints on economic activity, including unreliable energy supply and inefficiencies in freight rail and ports.
At the same time, the budget recognises that fiscal pressures require careful spending choices. Debt-service costs continue to absorb a growing share of resources, accounting for about 22 cents of every rand of revenue collected. This limits the resources available for new programmes and highlights the importance of stabilising public debt.
Government has therefore emphasised the need to reprioritise spending within departments and improve the efficiency of public expenditure. Strengthening project preparation, improving procurement systems and expanding partnerships with the private sector are all identified as ways to improve the impact of public investment.
Overall, the expenditure framework reflects a careful balancing act: protecting social spending while maintaining investment in growth-enhancing infrastructure within tight fiscal constraints.
2026 Budget Speech: Economic Outlook.
South Africa’s 2026 Budget outlines a modest but improving economic outlook, reflecting gradual recovery alongside persistent structural challenges in the economy. National Treasury expects the economy to grow by 1.6% in 2026, following estimated growth of 1.4% in 2025. Over the medium term, growth is projected to average about 1.8% between 2026 and 2028, reaching 2% by 2028 if reforms continue and investment strengthens. Several factors are expected to support this gradual recovery. Improved macroeconomic stability, progress on structural reforms and stronger investor confidence have helped lower borrowing costs and support economic activity. Treasury notes that improvements in infrastructure and logistics – particularly in electricity supply, rail and ports – could further unlock investment and boost growth.
Household spending remains an important driver of economic activity. Household consumption is estimated to have grown 3.1% in 2025, before moderating to 1.8% in 2026 as the economy normalises after a period of stronger growth. Over the medium term, consumption is expected to average around 2%, supported by rising real incomes, lower inflation and improving credit conditions.
Investment is also expected to recover. After contracting in recent years, fixed investment is projected to grow by about 2.4% in 2026, supported by improved financing conditions, infrastructure projects in energy, water and transport, and investment in renewable energy and digital infrastructure.
Despite these improvements, unemployment remains a significant concern. South Africa’s official unemployment rate averaged 31.9% during the first three quarters of 2025, while the labour force absorption rate remains low at 40.6%, highlighting the persistent gap between labour supply and job creation.
Inflation is expected to remain contained within the South African Reserve Bank’s target range, rising slightly from 3.2% in 2025 to 3.4% in 2026 before easing again over the medium term.
Overall, the economic outlook reflects gradual improvement but continued structural constraints, underscoring the importance of reforms that expand productive capacity and support faster, more inclusive growth.
2026 Budget Speech: Managing Public Sector Institutions.
South Africa’s 2026 Budget highlights the importance of restoring the financial and operational health of public sector institutions, particularly state-owned companies responsible for delivering critical infrastructure and services. Many of the country’s largest infrastructure institutions – including those responsible for electricity generation, rail and ports – face significant operational and financial pressures. Years of underinvestment, governance weaknesses and rising debt have weakened their performance, with broader consequences for the economy. Constraints in electricity supply and freight logistics have become major bottlenecks to investment, exports and economic growth.
The budget emphasises that improving the governance and financial sustainability of these institutions is essential to reducing fiscal risks. Government guarantees to public entities amount to about R1 trillion, representing a substantial potential liability for the national budget. These guarantees are heavily concentrated in a small number of large state-owned companies, particularly Eskom and Transnet, meaning financial stress in these institutions poses significant risks to the fiscus.
Strengthening oversight and governance is therefore a key priority. Government is focusing on improving board oversight, strengthening financial management and enhancing monitoring of public entities. The budget also highlights the importance of improved fiscal risk monitoring frameworks, including regular reporting on guarantees, contingent liabilities and the financial performance of major public institutions.
At the same time, reforms are underway to improve operational performance and attract investment. These include opening freight rail networks to third-party operators, expanding private participation in port terminals, and enabling greater private investment in electricity generation and transmission. These reforms are intended to improve efficiency in key network industries while mobilising private capital.
Public institutions will also play a central role in delivering infrastructure investment. Government and public entities are expected to spend more than R1 trillion on infrastructure over the medium term, with projects in energy, transport, water and social infrastructure. In addition, the Infrastructure Fund pipeline includes projects worth several hundred billion rand, aimed at crowding in private investment.
Overall, the 2026 Budget makes clear that restoring the health of public sector institutions is critical to improving infrastructure delivery, reducing fiscal risks and supporting stronger economic growth.
2026 Budget Speech: Tax Highlights.
On the personal tax side, personal income tax brackets and rebates will be adjusted in line with inflation, providing modest relief to taxpayers by preventing “bracket creep.” Medical tax credits will also see a small increase, rising from R364 to R376 per month for the first two members, and from R246 to R254 for additional dependants.
The budget also confirmed several excise duty adjustments. Duties on alcohol and tobacco will increase in line with inflation. Fuel-related levies will also rise from 1 April 2026 – the general fuel levy increases by 9 cents per litre on petrol and 8 cents per litre on diesel, while the Road Accident Fund levy increases by 7 cents per litre.
Several important tax thresholds and investment limits have been expanded. The annual deduction limit for retirement fund contributions increases to R430,000, while the annual capital gains tax exclusion rises to R50,000. The exclusion for the disposal of a primary residence increases from R2 million to R3 million, and the annual tax-free savings contribution limit increases to R46,000.
Overall, the 2026 budget prioritises incremental adjustments rather than major tax reforms, balancing fiscal pressures with modest taxpayer relief. Should you require professional advice on the new tax changes, do not hesitate to contact our offices.
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