The South African Government has recently published its 2026 Budget, delivering the first inflationary adjustment to personal income tax since 2023/24. Tax brackets and rebates increase by 3.4% from 1 March 2026, providing relief primarily to lower- and middle-income earners. Tax experts from our South African member firm ENS Africa have published two articles highlighting the key developments from the Budget for private clients and share plan participants.
Key updates for private clients include:
Personal rebate increases to ZAR17,820, and the tax-free threshold for taxpayers under 65 rises to ZAR99,000.
Medical tax credits rise to ZAR376 for the first two members.
The single discretionary allowance doubles to ZAR2 million per year, covering travel, investments, donations, and remittances via Authorised Dealers.
Donations tax relief between spouses will now apply only where the recipient spouse is a South African tax resident, effective immediately, targeting arrangements used to circumvent donations tax and exit tax rules.
The Budget also introduces measures relevant to share incentive schemes and employment structures:
Personal tax brackets and rebates increase by 3.4% from 1 March 2026, mirroring the relief for individual taxpayers.
The single discretionary allowance rises to ZAR2 million per year for all purposes, including investments and donations.
Withholding tax rules for non-resident employers with a South African permanent establishment are clarified: employees must be effectively connected to the permanent establishment before withholding obligations arise. This resolves anomalies where employees had no functional link to the South African operation. The amendment applies from 1 March 2026.
