The 2026 Budget contains important details that are easy to miss at first glance. Its most valuable insights are not in the headlines but scattered through the fine print – small policy “gold nuggets” that financial advisers will need to identify and interpret for their clients.
Ronald King (pictured), vice-president of the Financial Intermediaries Association and head of public policy and regulatory affairs at PSG, unpacked these points during a webinar hosted by the Financial Planning Institute of Southern Africa last week.
He focused on what the measures mean in practice, arguing their significance lies in how a series of technical adjustments combine to shift key assumptions used in planning, modelling, and portfolio construction.
He emphasised that financial advisers should review their clients’ plans as soon as possible. The breadth of the changes means many existing strategies – including estate, succession, retirement, and tax planning – may be out of date. Portfolios, savings plans, and structures should be checked to ensure they align with the new framework.
These threshold changes, he said, are not merely technical updates. They can influence behaviour, decisions, and long-term outcomes, and may ultimately have a greater impact than the headline Budget figures suggest.
Bracket relief restores confidence – not purchasing power
The 3.4% adjustment to the personal income tax brackets delivers only modest monetary relief. King illustrated the scale: someone earning R750 000 annually saves roughly R3 400 a year – “basically just enough to cover the cost of the increase in the price of meat”.
The psychological effect may matter more than the cash value. He believes that restoring taxpayer confidence can materially influence growth expectations, potentially adding up to one percentage point to GDP growth if sentiment improves sufficiently.
Treasury’s official forecast in the 2026 Budget is for real GDP growth of about 1.6% in 2026, up from roughly 1.4% in 2025. Growth is expected to continue gradually improving, reaching about 2% by the end of the medium-term period (around 2028).
The medical tax rebates were increased in line with inflation: the monthly medical scheme tax credit for the principal member and first two beneficiaries rose from R364 to R376, and for each additional beneficiary it went from R246 to R254. This is the first inflation-linked increase in two years and delivers modest relief for households that contribute to medical schemes.
King described this move as significant because it signals the Treasury is not preparing to phase out the medical tax credits any time soon – contrary to earlier speculation.
Threshold adjustments reshape planning strategy
One of the most consequential themes for advisers is the widespread upward revision of thresholds and limits. King noted that some of these figures have been static since as far back as 2002, with very few adjustments since 2020. Their revision, he said, “will have a significant impact on financial planning” and materially alter how advisers structure client strategies going forward.
Read: Changes to CGT, tax-free savings, retirement contributions, and donations
Capital gains tax: rates stable, thresholds shift planning
Capital gains tax (CGT) featured prominently in King’s analysis – not because the rates increased, but because they did not.
He has long argued that CGT is one of the easiest revenue levers available to the government. This year, however, the inclusion rates were left unchanged.
That stability provides certainty. But the real planning impact lies in the higher exclusions.
The annual CGT exclusion rises from R40 000 to R50 000, creating more scope for structured annual disposals. The primary residence exclusion increases from R2 million to R3m, improving estate liquidity for property-heavy households.
The death-year exclusion increases from R300 000 to R440 000. King reminded advisers that death is a CGT event for most assets. The higher exclusion reduces immediate tax friction in estates and should prompt a review of estate projections.
For business owners over 55, the small-business disposal exclusion increases from R1.8m to R2.7m. This can significantly reduce exit tax, but only where the individual disposes of a qualifying sole business. Advisers should ensure clients understand the conditions.
King also highlighted structural planning nuances. Discretionary trusts can face effective CGT rates of up to 36%, while certain endowment structures may reduce the rate to about 12% for qualifying arrangements. He cautioned, however, that product costs can erode the tax benefit.
In short, CGT rates stayed the same – but the thresholds and exclusions materially change planning calculations. Advisers should revisit disposal strategies, estate modelling, and investment structures accordingly.
Donations tax: higher exemptions – and a closed loophole
The increase in the annual donations tax exemption to R150 000 for natural persons (and R20 000 for entities) expands inter vivos estate planning flexibility. King reminded advisers that many clients overlook the entity exemption within corporate structures, which can be strategically deployed.
However, a notable anti-avoidance measure was introduced. Historically, spouses could donate unlimited amounts to one another free of donations tax. This was used in certain emigration strategies: one spouse would cease tax residency, after which the resident spouse would donate substantial assets to the now non-resident spouse – effectively mitigating donations tax and sometimes triggering more favourable CGT outcomes.
That route will be closed. Donations to a spouse who is a non-tax resident will no longer qualify for the unlimited exemption. Although King suggested this may not affect most clients, for high-net-worth households with cross-border planning in motion, the impact is material.
Retirement and savings incentives reinforced
The retirement contribution deduction cap increasing from R350 000 to R430 000 (while retaining the 27.5% rule) signals Treasury’s continued support for retirement saving – particularly for earners up to about R1.5m annually.
Advisers should reassess whether clients are fully utilising available retirement deductions – and, where appropriate, whether excess (non-deductible) contributions may still serve long-term planning objectives.
King noted that the annual Tax-Free Savings Account (TFSA) contribution limit has increased to R46 000, up from R36 000, giving investors more room to build tax-free capital each year. The lifetime cap remains at R500 000, which he suggested is likely because relatively few investors have reached it. Treasury may revisit that ceiling only once more savers approach the limit.
He also pointed out a practical implication: the new figure means monthly debit orders will have to be adjusted, reinforcing the need for proper planning rather than rough calculations.
He reminded advisers that TFSAs do not allow over-contributions without penalties, unlike retirement funds where excess contributions can still form part of a strategy. He urged advisers to check whether clients are fully utilising the available tax-efficient savings vehicles and update contribution plans accordingly.
Retirement planning signals policy direction
King said he was surprised by the higher retirement-contribution deduction cap. There has been pressure behind the scenes to restrict deductions for high earners, yet Treasury instead raised the limit, which he interpreted as evidence that policymakers remain committed to incentivising retirement savings.
He also highlighted a technical but important point: contributions above the 27.5% deductible limit can still be made and may be advantageous in certain client strategies – something advisers should actively assess.
The increase in de minimis annuitisation thresholds likewise alters retirement-exit planning. Members can now fully commute balances below R360 000 (up from R247 500), and living annuities may be commuted below R150 000 (up from R125 000), calculated per insurer or fund rather than per policy.
Micro-business and VAT changes favour small enterprises
Treasury’s decision to raise the compulsory VAT registration threshold from R1m to R2.3m was singled out by King as one of the most practically meaningful relief measures for smaller firms. He noted that reaching the previous threshold had become “quite easy”, meaning many small businesses were being pulled into the VAT system earlier than intended, with disproportionate compliance costs.
Read: Increase in the VAT registration threshold
By lifting the threshold, he said, smaller enterprises will be able to operate longer without the administrative burden of VAT registration, filing requirements, and compliance complexity.
Importantly, businesses already registered below the new threshold may apply to deregister, giving firms flexibility to reassess whether VAT participation still makes sense for their structure and client base.
King framed the change as part of a broader policy signal: rather than raising rates, Treasury is widening the breathing room for smaller operators.
Turnover tax relief for micro-enterprises
Alongside the VAT adjustment, King highlighted major changes to the turnover-tax regime for micro-businesses, describing them as unexpectedly generous. The turnover bands have been expanded significantly, allowing qualifying firms to pay tax purely on turnover rather than calculating taxable income through full financial statements.
Under the revised structure:
- Turnover below R600 000 → 0% tax
- R600 000–R950 000 → 1%
- R950 000–R1.4 million → 2%
At these levels, he noted, a business generating roughly R1m in turnover will pay only about R4 500 in tax, calling this “quite a low tax rate” and emphasising it is substantially lower than what many small firms would otherwise face under the standard tax system.
He described the combined effect of the revised bands and threshold increases as “really, really good for our micro businesses”, arguing the lighter tax and compliance burden could materially improve survival rates and encourage informal operators to formalise.
Offshore investing: advisers urged to rethink assumptions
The Budget doubled the single discretionary foreign allowance to R2m and raised cross-border transaction limits. Moving money offshore is now easier.
But in King’s view, this is not a cue to increase clients’ offshore exposure.
He said the assumption that the rand will steadily weaken is no longer as strong. In the past, the rand tended to depreciate roughly in line with the inflation gap between South Africa and the United States – around five to six percentage points. That gap is now closer to one. If currencies broadly follow inflation differences over time, there is far less built-in pressure for continued rand weakness.
King also noted that the rand looks undervalued on several measures, including purchasing power comparisons. While he cautioned against relying on a single indicator, he said many analysts believe the currency could strengthen by R2 to R3 if conditions support it.
He added that two rating agencies are effectively behind the curve on South Africa’s fiscal improvement. If the government maintains its consolidation path and delivers similar Budget next year, ratings upgrades are possible. A return to investment grade would likely attract capital inflows, lower borrowing costs, and support the rand.
Combined with structural pressures that could weaken the US dollar over time, King sees a stable or stronger rand as a realistic scenario.
The practical takeaway is clear: advisers should not build offshore projections on automatic currency gains. If the rand stays flat or strengthens, foreign assets may deliver lower rand returns than clients expect.
He also pointed out that recent gains on the JSE have been driven mainly by mining shares, while much of the broader market has yet to re-rate. If fiscal momentum continues and ratings improve, local equities could benefit.
King was not arguing against offshore diversification. His point was that allocation decisions should reflect current economic conditions, not historic depreciation trends. For advisers, this means reviewing currency assumptions, stress-testing portfolios, and explaining to clients that offshore exposure is not a guaranteed hedge against local risk.
Collective investment schemes: tax certainty welcomed
One of the most technical – but important – Budget developments is how collective investment schemes will be taxed. King said the change follows extensive engagement between industry bodies and Treasury after concerns about how short-term trading inside funds might be treated for tax purposes.
Some fund managers now execute very short-duration trades, including intra-day transactions. Under normal tax rules, this could be viewed as a “profit-making scheme”, meaning gains would be taxed as revenue rather than capital. That distinction matters. Revenue gains can attract significantly higher effective tax rates, particularly in trust structures. It could also have forced funds to distribute profits simply to pay tax, creating liquidity strain.
Treasury now intends to amend the law so that growth inside CIS portfolios will be treated as capital in nature. The approach will also apply to retail hedge funds. King described the certainty this brings as “a good thing” because it removes ambiguity and reduces structural risk for funds and investors.
The change does not apply to everything. Interest income within income funds will still be taxed as revenue. The clarification mainly affects equity and derivative trading activity.
In practical terms, the proposal delivers three benefits: tax certainty, no forced distributions purely for tax reasons, and protection of after-tax returns – particularly for investors using trusts or higher-tax structures. King said although the final wording is still to come, the policy direction appears settled and reflects Treasury responding to industry input.
A compliance risk many advisers overlook
One of King’s strongest warnings was not about tax – it was about process. He said proposed changes to how unclaimed assets are handled could directly affect advisers’ income if client interaction is not properly documented.
Treasury estimates that about R88 billion in unclaimed assets sit across the financial system, much of it in retirement funds where members can no longer be traced. The government plans to centralise these balances in a national fund and improve tracing. Although this may benefit the system, King said advisers should focus on the practical consequence: dormant-account rules.
Under earlier proposals, if no interaction with a client can be shown for three years, an investment may be classified as dormant, and fees can no longer be charged. Continued inactivity could eventually see the asset treated as unclaimed.
The key issue is proof. Advisers must be able to demonstrate engagement through records, such as reviews, correspondence, and statements sent. It is not enough to assume contact happened.
Importantly, losing fees does not remove legal responsibilities. An adviser could still be required under the FAIS Act to service a client while earning nothing from that account. King said that makes this a business risk, not just a compliance detail.
Keep contact details current, document interactions, and maintain clear audit trails. In his view, this is one of the easiest risks to manage – but also one of the easiest to miss.
