The 2026 National Budget, presented to Parliament by the Minister of Finance in February 2026, brought a set of targeted changes to the tax landscape for individuals. Understanding what changed — and what didn't — is essential for financial planning going into the 2026/27 tax year (which runs from 1 March 2026 to 28 February 2027).
Income Tax Brackets: Below-Inflation Adjustment
The 2026/27 personal income tax brackets were adjusted, but by less than consumer price inflation — a pattern known as fiscal drag. When brackets don't keep pace with inflation, workers who receive salary increases to match inflation find themselves in higher tax brackets, paying more tax in real terms even though their purchasing power hasn't increased.
The 2026/27 individual income tax brackets are:
| Taxable Income (R) | Rate | Change from 2025/26 |
|---|---|---|
| 0 – 245,100 | 18% | Adjusted |
| 245,101 – 381,200 | 26% | Adjusted |
| 381,201 – 528,000 | 31% | Adjusted |
| 528,001 – 731,600 | 36% | Adjusted |
| 731,601 – 1,103,100 | 39% | Adjusted |
| 1,103,101 – 1,643,600 | 41% | Adjusted |
| Above 1,643,600 | 45% | Unchanged |
The primary rebate increased to R17,820 (from R17,235 in 2025/26). The secondary rebate (for taxpayers 65 and older) is R9,936. The tertiary rebate (for those 75+) is R3,321.
What Is Fiscal Drag and How Does It Affect You?
Inflation in South Africa ran at approximately 4.5%–5.5% through 2025. If your salary kept pace — say a 5% increase — but the tax brackets only moved by 2%, you're effectively paying more income tax in real terms. This is intentional revenue policy: it allows government to collect more without formally raising tax rates.
A practical example: an employee earning R500,000 who receives a 5% increase to R525,000 might move from the 31% band into the 36% band on their marginal rands, depending on the exact thresholds. Even if they stay in the same bracket, the bracket now covers less real income than it did before.
Medical Aid Tax Credits: Unchanged
The medical aid tax credit rates were not adjusted in the 2026 Budget. They remain:
- R364/month for the first two members
- R246/month for each additional member
Since medical aid premiums typically increase by 7%–10% annually, the unchanged credits represent an erosion of real relief. Families with medical aid face a larger after-credit cost year-on-year. Treasury has frozen medical credits in several recent budgets as a revenue-preservation measure.
General Fuel Levy and Road Accident Fund Levy
The 2026 Budget increased the General Fuel Levy by 16 cents per litre and the Road Accident Fund (RAF) levy by 10 cents per litre, effective April 2026. This brings the combined levy burden on petrol to over R4.50 per litre in 2026/27.
Fuel levies are a regressive tax — they hit lower-income South Africans proportionally harder. But they are a reliable revenue source that funds roads infrastructure and the RAF. The increases are broadly in line with recent annual patterns and were anticipated by fuel markets.
VAT: No Change
After significant public debate in 2024–2025 about whether to increase VAT (South Africa's standard rate of 15% is relatively moderate internationally), the 2026 Budget confirmed no change to the VAT rate. This was broadly welcomed, as a VAT increase is particularly burdensome on lower-income households who spend a higher proportion of income on consumables.
The zero-rating on basic foodstuffs (brown bread, maize meal, rice, vegetables, eggs, milk, etc.) was maintained without changes to the list of zero-rated items.
Sin Taxes: Above-Inflation Increases
As is traditional, the 2026 Budget increased excise duties on alcohol and tobacco at rates well above CPI:
- Beer: Increased by approximately 6.7% per can
- Wine: Increased by approximately 6.7% per bottle
- Spirits: Increased by approximately 6.7% per 750ml bottle
- Cigarettes: Increased by approximately 6.7% per pack
- Heated tobacco products: Increased in line with cigarettes
- Sugar sweetened beverages: The health promotion levy was adjusted upward
Retirement Fund Contributions: No Change to Caps
The retirement fund contribution deduction limits remain at 27.5% of the greater of remuneration or taxable income, capped at R350,000 per year. Similarly, the TFSA limits remain at R36,000/year and R500,000 lifetime.
No changes were made to the Two-Pot Retirement System, which was introduced in September 2024. The two-pot rules (one accessible pot, one preserved pot) continue as legislated.
CGT Inclusion Rate and Annual Exclusion: Unchanged
Capital gains tax parameters were not adjusted. The individual inclusion rate remains 40%, the annual exclusion remains R40,000, and the primary residence exclusion remains R2,000,000. The maximum effective CGT rate remains 18%.
Estate Duty: No Change
Estate duty rates remain unchanged: 20% on estates up to R30 million, and 25% on the dutiable portion above R30 million. The abatement (basic deduction) remains at R3.5 million per estate. Bequests to a surviving spouse remain fully exempt.
What the Budget Means for Your Take-Home Pay
For a taxpayer earning R600,000 per year with no additional deductions, the 2026/27 PAYE after the primary rebate is approximately R116,940. Compared to 2025/26 (where the same income may have been taxed slightly more due to bracket adjustments), the below-inflation adjustment means most taxpayers see a modest nominal reduction in PAYE — but in real terms (accounting for inflation), they are paying slightly more.
The practical implication: maximise your retirement annuity contributions and TFSA usage. These are the most powerful tools available to reduce your taxable income within the 2026/27 framework — and neither was restricted in the 2026 Budget.
Use the BleedRate calculator to model your exact 2026/27 tax position with your current income and deductions.