South Africa’s 2026 National Budget, delivered by the Minister of Finance, Enoch Godongwana, on 25 February 2026, followed a turning point in our economy from 2025. We’ve noticed improved national economic performance, easing debt pressure, and cautious optimism for some months, all of which are reflected in this year’s national financial plan. Below, we break down the highlights of the 2026 Budget, compare them with the 2025 Budget, and explore what the changes might mean for you.

A checklist of what changed in the Budget Speech

The national debt

For the first time in 17 years, South Africa’s debt trajectory has stabilised, and debt service costs are beginning to fall – a result of years of disciplined fiscal management and improving structural reforms. The government reports that the budget deficit is narrowing, and improved fiscal credibility has recently helped secure the country's first credit rating upgrade in 16 years. National Treasury expects the consolidated budget deficit to shrink from 4.5% of GDP in 2025/26 to 3.1% by 2028/29, while government revenue continues rising across the medium term. 

Tax relief for individuals 

A major headline item of the 2026 Budget is the scrapping of the previously planned R20 billion tax increase. Improved revenue collection – driven largely by a commodities upswing – allowed the Treasury to withdraw the proposal. Your personal income tax brackets and medical tax credits will now be fully adjusted for inflation for the first time in 3 years, offering real relief to you as a taxpayer. 

Small business tax support 

Micro and small businesses will benefit significantly in 2026 through the increase in VAT registration thresholds, which will ease administrative burdens on small enterprises. Godongwana also announced that the threshold on the capital gains tax exemptions on small business asset disposals has been raised to R15 million, a 50% increase. Both these measures are intended to stimulate entrepreneurship and support job-creating businesses.

Infrastructure investment

Government has committed just over R1 trillion to logistics, energy, water, and sanitation projects over the next 3 fiscal years. This includes new contracting opportunities for the private sector, especially in construction. 

Social grants

From 1 April 2026, social grants will increase slightly above the 3.5% inflation rate. The older person’s grant rises from R2,315 to R2,400 (3.7%), and the child support grant increases from R560 to R580 (3.6%). Government expects to spend R292.8 billion on grants in 2026/27, including R36.9 billion for the Social Relief of Distress (SRD) grant, which remains at R370 per month. 

Alcohol and tobacco taxes and fuel levy

Taxes on alcohol and tobacco will increase by 3.4%. Fuel levies will rise by 21 cents per litre for 93 octane petrol, driven by inflation-linked adjustments and carbon costs. 

Savings

To take advantage of the relatively favourable economic conditions, government has provided some incentives to promote your personal financial resilience, raising the tax-free savings account contribution limit to R46,000 a year (from R36,000), and the retirement tax deduction limit to R430,000 (from R350,000). 

What changed between the 2025 and 2026 Budgets?

The relatively positive picture this year can be compared to the fiscal constraints of last year’s outlook.

Tax 

2026 offers real tax relief, with tax brackets and credits such as medical aid fully adjusted for inflation, unlike the past 2 Budgets. 

No attempted VAT hikes

The 2025 Budget was delayed significantly while parties within the Government of National Unity wrangled over a proposed VAT rate hike, which was eventually abandoned.

Social spending increases

2025 maintained grants but offered little real growth, while the 2026 Budget provides above-inflation increases in all major grant categories. The SRD grant remains unchanged at R370, but new allocations make its permanence increasingly likely.

Smaller ‘sin’ tax increases

Tobacco and alcohol users will still pay more, but the increase won’t be as large.

More positive national debt position

This year, debt has stabilised, deficits are shrinking, and debts service costs are declining for the first time in years. 

Impact on your finances

Inflationary adjustments to tax brackets and medical credits mean that you should keep more of your take-home pay, especially if your salary increases to match inflation. This marks a reversal from 2025, when frozen brackets effectively increased taxes for you. Higher costs for fuel, alcohol and tobacco will affect these tax and income gains, though. 

Grants for vulnerable households, including the aged, children, and those in special care, will all increase above inflation rates, which means improved and more meaningful financial support. This is especially significant given rising living costs and persistent unemployment. 

The improved conditions for TFSAs and retirement savings also mean more opportunities for you to build safety nets and retirement stability, all with tax incentives. From a macroeconomic point of view, if the R1 trillion infrastructure pipeline is used effectively with private sector involvement, it will generate more opportunities in construction, engineering, logistics, and related sectors. 

In summary, the personal tax position and business climate has improved, with small businesses, as job creation engines, seeing higher VAT registration thresholds and improved capital gains tax exemptions. The bottom line for all of us is a National Budget that offers more relief than strain – an encouraging development after several challenging years.

Learn more about Tax-free Savings Accounts (TFSAs) with Nedbank, and how to look after your personal tax affairs more efficiently.