The 2026 Budget has brought some relief for ordinary citizens with the withdrawal of the previously anticipated R20-billion tax increase.
“Personal income tax brackets and rebates are adjusted in line with expected inflation of about 3.4% after two years of frozen thresholds. This prevents bracket creep, where workers move into higher tax brackets simply because their salaries rise with inflation,” Professor Cameron Modisane, deputy executive dean: College of Accounting Sciences at the University of South Africa, reflected on the 2026 Budget speech by Minister of Finance Enoch Godongwana.
“In practical terms, if your salary increases only to match inflation, you will not pay more tax in real terms. Medical tax credits are also adjusted for inflation. This preserves purchasing power rather than increasing it, but it offers meaningful relief after a period of stagnation,” Prof Modisane said.
Minister Godongwana announced that the annual tax-free savings account limit will increase from R36 000 to R46 000, encouraging households to save and invest.
Godongwana said the budget “comes at a delicate time when growth remains modest, public debt is stubbornly high, and households continue to struggle with the rising cost of living”.
The central question is whether Budget 2026 meaningfully shifts South Africa’s fiscal path or simply manages existing pressures more carefully.
Managing the national debt
Prof Modisane further raised caution about the debt service cost which amounts to R432.4-billion.
“This is money used to pay interest on past borrowing rather than to build infrastructure, expand services or stimulate growth. Every rand spent on interest reduces the space available for development,” he said.
“Debt to GDP is expected to peak at about 78.9% before gradually declining. The consolidated budget deficit is projected at 4% of GDP and is expected to narrow to about 3.1% over the medium term. Government also anticipates achieving a primary surplus, where revenue exceeds non interest expenditure. These projections are important for investor confidence and market stability.
“Yet the debt story is more complex. In recent years debt projections have been revised upward several times. Economic growth remains weak, forecast at around 1.4% to 1.6& in the near term. When growth is low, the debt ratio improves slowly even if spending discipline is maintained,” he said.
How government will spend taxpayers’ money this financial year
The government plans to spend R2.67-trillion in 2026/2027. Of this amount, R1.58-trillion is allocated to social services.
Education receives R527.2-billion, health R310-billion, social development R446.6-billion and community development R294.3-billion. This confirms that the social wage remains central to government policy.
What the experts say
Mametlwe Sebei, of Unisa’s School of Law is critical of the pronouncements made by Godongwana.
“This budget is an exercise in ideological pacification. It seeks to reconcile us to the idea that there is no alternative, that the state’s primary duty is to ensure the profitability of capital, and that the needs of the working class must be subordinated to the fiscal anchor,” he said.
“It asks us to believe that a primary budget surplus is more important than filling half a million vacant posts in our clinics, schools, and police stations. It demands we accept that a few billion rands “saved” from transport and social grants is a victory, while the housing backlog of 3.7 million units, the collapsing public healthcare system, and the explosion of household debt are simply unfortunate realities of an otherwise sound strategy,” he said.
But Prof Siphiwe Madikizela of the College of Economic Management Sciences argued that Godongwana presented “a very balanced budget”.
He noted that the 1,6% economy growth was much better than in the previous years but still falls short of the 5% projected growth rate registered in previous years.
Madikizela also highlighted the allocation made to infrastructure development, particularly in water, electricity and roads, but warned that maintenance remained a high priority.
He flagged crime as a huge contributor to slow economic growth and advised that the state needs to invest more in crime prevention mechanisms, including use of drones and employing more police personnel.
He highlighted the success of the South African Revenue Services in managing to generate R12-trillion as a major success, saying the funds need to be reinvested into job creation, support of SMMEs, crime fighting and infrastructure development.
Personal Income Tax
Neo Molefi-Kau, senior lecturer in the department of taxation said the budget provides relief for individuals through inflation-linked adjustments to personal income tax brackets and rebates have been implemented fully in line with inflation for the 2026/27 tax year.
“This is a meaningful step to prevent bracket creep, where taxpayers can end up paying higher tax simply because nominal increases in their income. This provides relief to households by protecting real disposable income,” Molefi-Kau said.
“The annual tax-free savings account limit has also been increased from R36 000 to R46 000, and the retirement fund deduction cap has increased from R350 000 to R430 000. These measures encourage greater long-term saving and investment by individuals,” she said.
Molefi-Kau noted the withdrawal of the previously planned additional tax increases amounting to R20-billion.
“While these adjustments do not result in reduced tax rates, they do ease some pressure on taxpayers and support consumer spending, especially after years of elevated living costs,” she said.
Prof Bernadene De Clercq of the department of taxation said it was a good budget speech that surprised many people and most didn’t see that coming in terms of tax relief that was allocated to households.
“It was a good budget, but there are doubts about sustainability. There are still many problems to be addressed. While we are “taking the win” for now, we must remember it is an election year. The government is trying to find a balance, and fortunately, the budget process was more streamlined and consultative than last year, which is good for the country,” said De Clercq.
“However, we shouldn’t have a false sense of security. From a taxation perspective, individual taxpayers received a windfall, but these amendments were long overdue because tax brackets hadn’t been adjusted for bracket creep over the last two years,” she said.
De Clercq said the budget was “definitely positive for small businesses”
She said raising the VAT threshold to R2.3-million helps them focus on sustainability without being constrained by administrative issues early on.
She warned, however, that South Africa still has a high corporate income tax compared to other countries, which isn’t investment friendly.
“The bigger issue is policy uncertainty. Big business isn’t investing because they aren’t confident in the government’s policy direction.
“We need to address these issues to support the tax revenue we need,” she said.
On the question of whether it is sustainable to have so many SMEs earning under R2.3-million not paying VAT, De Clercq said it’s important to clarify that they do pay VAT on all their acquisitions.
“They just aren’t charging VAT. So the state isn’t necessarily missing out on that money. Our real problem is a small tax base. Very few individuals and corporates are paying the bulk of the taxes. The recurring story for years has been the need for economic growth. We should be growing at 5% or 6%, but we aren’t. Our population growth is exceeding our economic growth, which is systemic and problematic.
“If we had more growth, we would have more taxpayers to reduce the burden on the current small group.”
