2.2 Medical tax credits Medical tax credits will increase from R364 to R376 for the first two members, and from R246 to R254 for additional members.

2.3 Allowing rollover treatment of capital allowances on allowance assets transferred between spouses The Income Tax Act regulates the transfer of assets between spouses through section 9HB of the Act. This provision establishes a rollover mechanism for the transfer of trading stock, livestock and capital assets between spouses. However, the recoupment component of the rollover for allowance assets is not provided for, as section 9HB does not prevent the recoupment of capital allowances in the hands of the transferor spouse under section 8(4)(k) of the act, nor does it allow the transferee spouse to take over the accumulated allowances previously claimed. It is proposed that section 9HB be amended to prevent the recoupment of capital allowances on the transfer of allowance assets between spouses and to provide for the carry-over of accumulated allowances to the transferee spouse.

2.4 Limiting the donations tax exemption rules where a spouse ceases to be a tax resident Section 56 of the Income Tax Act exempts donations between spouses from donations tax. Government has become aware of tax avoidance arrangements, particularly involving high-net-worth individuals planning to cease to be South African tax residents. The arrangement involves deliberately staggering the cessation of tax residence between spouses where significant assets are transferred to a spouse who has already become non-resident before the remaining spouse ceases residence. In these circumstances, the donations tax exemption applies, while the subsequent cessation of tax residence by the remaining spouse results in a reduced income tax liability under section 9H of the Act. These arrangements are designed to avoid both donations tax and the income tax on cessation of residency, undermining the original policy intent of these provisions. It is proposed that the donations tax exemption rules applicable to spouses be limited to donations made to a spouse who is a resident effective from 25 February 2026.

2.5 Extending the eligibility for the medical scheme fees tax credit Certain statutory medical schemes face regulatory constraints that remove them from the authority of the Council for Medical Schemes. Consequently, individual members of these schemes are not eligible for the medical scheme fees tax credit under section 6A of the Income Tax Act. It is proposed that eligibility for this tax credit be extended to such members, provided that the schemes offer benefits, and adhere to governance and solvency requirements that are at least equivalent to those prescribed under the Medical Schemes Act (1998).

2.6 Increase in annual contribution limit to tax-free investments Currently, contributions to a tax-free investment are limited to R36 000 per annum, which annual limit has been in place since 2021. The annual limit will be increased to R46 000.

2.7 Single discretionary allowance To take account of inflation and currency fluctuations, the single discretionary allowance limit for private individuals is increased from R1 million to R2 million per calendar year via Authorised Dealers for all purposes, including travel, gifts, remittances, investments and donations. Permitted single discretionary allowance transfers via Authorised Dealers in foreign exchange with limited authority are increased from R1 million to R2 million. The limit will be reviewed regularly.

2.8 Increases to certain taxes The excise duties on tobacco will be increased in line with inflation. This includes excise duty on electronic nicotine and non-nicotine delivery systems. The excise on alcoholic beverages also rises by inflation.

In terms of fuel levies, the total increase will also be in line with inflation, and the general fuel levy will go up by 9 cents per litre for petrol and 8 cents per litre for diesel. The carbon fuel levy will go up by 5 cents per litre for petrol and 6 cents for diesel. The Road Accident Fund levy will increase by 7 cents per litre.

2.10 Excluding certain exempt entities that are companies from the definition of “provisional taxpayer” The definition of “provisional taxpayer” in the Fourth Schedule of the Income Tax Act excludes certain entities that are subject to partial taxation. The exclusion of these entities was mainly aimed at reducing their compliance burden, for example, the difficulty in determining how provisional tax should apply to amounts subject to exemption only up to a specified threshold. In terms of paragraph (b) of the definition of “provisional taxpayer”, any company is a provisional taxpayer. It is thus proposed that fully exempt entities and certain partially exempt entities, which are regarded as companies, should also be excluded from being classified as provisional taxpayers.

2.11 Reviewing penalty regime for underestimation of provisional tax To trigger the penalty for underestimating provisional tax, a taxpayer must first underestimate their taxable income outside acceptable tolerances. If the taxpayer submits an estimate that is within the acceptable tolerance but pays no provisional tax, the underestimation penalty cannot be imposed. The only penalty applicable in these instances is the lesser late payment penalty. It is proposed that, with effect from 25 February 2026, timely payment of the amount of the estimate be required before it may be relied on. There are existing rules to ensure that there is no duplication of the underestimation and the late payment penalties. Furthermore, the R1 million cap for relying on amounts based on historical assessments, rather than current estimates, will be increased to R1.8 million for years of assessment commencing on or after 1 March 2026.

4.1 Retirement fund contribution deduction limits Currently, members contributing to a retirement fund may receive a tax deduction for contributions made to a retirement fund of up to 27.5% on the greater of remuneration or taxable income, but not more than R350 000 per annum. This means that a member may not deduct contributions for tax purposes of more than the annual limit of R350 000. This amount will be increased to R430 000 effective 1 March 2026.

4.2 Retirement interest de minimis (commutation) threshold for annuitisation Currently, at retirement, everything in the retirement component must be used to purchase an annuity – subject to the de minimis amounts which are calculated cumulatively across the entire retirement component and the non-vested portion of the vested component. The current de minimis is R247 500. This de minimis will be increased to R360 000 effective 1 March 2026.

4.3 Living annuity commutation The conditions for when a living annuity may be commuted is set out in the Income Tax Act. Paragraph (c) of the definition of living annuity in the Income Tax Act deals with commutation of a living annuity. It provides that the full remaining value of the living annuity may be paid in a lump sum when the value at any time becomes less than the amount prescribed by the Minister of Finance. The current prescribed amount of R125 000 will be increased to R150 000.

4.4 Determining the application of the de minimis (commutation) limit for multiple living annuities held with the same insurer or fund The Income Tax Act allows a living annuity to be commuted and paid as a lump sum when the value of the assets falls below the prescribed de minimis limit, currently set at R125 000 (which will be increased to R150 000 as of 1 March 2026). This limit is applied on a per-insurer or per-fund basis, depending on whether the living annuity is provided by the fund or purchased from an insurer, whereby the value of all living annuities held by an annuitant with the same insurer or fund is aggregated when applying the limit. However, differing interpretations of the law exist regarding whether this limit applies per policy or cumulatively per insurer or fund. Applying the limit on a per-policy basis could undermine retirement income security by enabling the early commutation of multiple small annuities and facilitating tax-driven restructuring of retirement assets. It is therefore proposed that the definition of “living annuity” in section 1 of the Income Tax Act be amended to explicitly provide that the prescribed de minimis limit must be determined cumulatively where an annuitant holds multiple living annuities with the same insurer or fund.

4.5 Unclaimed assets Government is implementing a reform to centralise the management and investment of over R88 billion in unclaimed financial assets, which include retirement benefits, bank accounts, investments and insurance payouts. This reform aims to ensure that the benefits of these assets accrue to the asset owners rather than to financial institutions, government or any other parties. The proposed framework provides for the transfer of these assets to a central manager to drive down costs and improve payouts with appropriate governance for investment, alongside the appointment of a central administrator responsible for administration, record-keeping and tracing. The reform will be rolled out in phases, starting with the retirement fund sector, given its established identification and monitoring systems. Over time, the framework will be extended to other categories of unclaimed financial assets. The centralisation of unclaimed financial assets seeks to address challenges associated with fragmented administration, inconsistent definitions and the erosion of value through fees. A unified system, supported by a central database and an administrator, is intended to strengthen tracing processes and enhance transparency. It is also expected to provide beneficiaries with a clearer and more streamlined claims process. A discussion note will be released shortly for public consultation.

4.6 Infrastructure investing The Minister indicated that infrastructure is attracting significant private sector investment. National Treasury and Development Bank of South Africa is currently setting up the Infrastructure Finance and Implementation Support Agency. The key focus areas are electricity transmission, transport, water, telecoms and visas. There are currently 63 public private partnerships/projects that are being managed.

6.1 Public Sector Early Retirement Programme Government has begun implementing its Early Retirement Programme to rejuvenate the public-sector workforce and manage compensation costs. Since the programme commenced in October 2025, 7 687 applications have been approved, while R3.7 billion of the available amount has been drawn down. The estimated net saving from this programme is R5.5 billion, of which R2.6 billion will be realised in 2026/27, R1.4 billion in 2027/28 and R1.5 billion in 2028/29.

6.2 Early Childhood Development grant The Early Childhood Development (ECD) grant will receive an additional R12.8 billion over the next three years, enabling services to reach 300,000 more children. The budget also maintains the per child, per-day subsidy of R24, introduced in 2025/26. In addition, allocations have been increased to ensure the National School Nutrition Programme keeps pace with food inflation, continuing to provide meals to over 9.9 million learners in nearly 20,000 schools.

6.3 Collective investment schemes Following public consultation after the publication of the discussion paper on collective investment scheme (CIS) taxation in 2024, the National Treasury will release a response document with revised proposals for further consultation. The draft recommendation in the response document proposes that all investment returns generated by regular CISs and retail investment hedge funds be taxed as capital. This is to encourage savings and to provide the industry with certainty about the tax treatment of these savings vehicles. CISs and retail investment hedge funds are open to the general public, are well regulated and have diversification and other requirements, providing an important avenue for savings. By contrast, qualified investment hedge funds are not open to the general public, have minimal investment criteria and only cater for those able to invest a minimum of R1 million. Government will propose excluding such qualified funds from the CIS tax regime. Alternative tax regime options for these funds will be proposed in the response document.