Investors, savers, and retirees stand to benefit from proposals in Budget 2026 to increase the thresholds and limits that apply to capital gains, retirement fund contributions, and tax-free investments.
The government also announced changes to the commutation thresholds for the annuitization of retirement savings and living annuities.
The tax-exempt portion of donations will also increase – but National Treasury plans to clamp down on what it describes as tax-avoidance arrangements between spouses who cease tax residency.
Capital gains tax
The government proposes increasing the annual exclusion on capital gains tax from R40 000 to R50 000. This exclusion applies to individuals and special trusts.
The annual exclusion for individuals in the year of death will increase from R300 000 to R440 000. The annual death exclusion was last increased in 2017.
The exclusion that applies on the disposal of a primary residence will increase from R2 million to R3 million.
The exclusion that applies when an individual who is 55 years or older disposes of a small business with a market value not exceeding R15m will increase from R1.8m to R2.7m. (Note the limit on the market value of the business will increase from R10m to R15m.)
These exclusions have not been increased since 2012.
The maximum effective rates of CGT remain unchanged at 18% for individuals and special trusts, 21.6% for companies, and 36% for other trusts.
Retirement fund contributions
Retirement fund members can claim a tax deduction on contributions to pension, provident, and retirement annuity funds during a year of assessment.
The deduction is limited to 27.5% of the greater of remuneration for employees’ tax or taxable income (both exclude retirement fund lump sums and severance benefits). Since 2016, the deduction has been further limited to the lower of R350 000 or 27.5% of taxable income (before the inclusion of a taxable capital gain).
From 1 March 2026, the overall deduction limit will be increased to the lower of R430 000 or 27.5%.
Tax-free Savings Accounts
The annual contribution limit to Tax-free Savings Accounts will increase from R36 000 to R46 000 on 1 March 2026. This is the first adjustment to the annual contribution limit since 2021.
The lifetime contribution limit will remain at R500 000, which means that individuals who contribute the full amount each year will reach their lifetime limit sooner.
Threshold on annuitisation
The de minimis commutation limit (also called the de minimis threshold for annuitisation) allows a full lump-sum payout from a retirement fund instead of forcing the fund member to annuitise (convert into a compulsory annuity) at least two-thirds of the benefit.
If your total retirement interest in the fund is below the prescribed de minimis limit, you can commute 100% of it as a lump sum — no annuity purchase is required.
The prescribed limit will increase from R247 500 to R360 000 from 1 March 2026.
The limit is applied per retirement fund (not across all your funds). For retirement annuities that consist of multiple policies/contracts within the same RA fund, the values are usually aggregated to check against the limit.
Living annuity commutation limit
A living annuity can be commuted and paid as a lump sum when the value of the assets falls below the de minimis limit. The prescribed limit will increase from R125 000 to R150 000 from 1 March 2026.
The 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.
National Treasury says in the Budget Review there are differing interpretations regarding whether the 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.”
Treasury is therefore proposing that the definition of “living annuity” in section 1 of the Income Tax Act be amended to make it clear that the prescribed de minimis limit must be determined cumulatively where an annuitant holds multiple living annuities with the same insurer or fund.
Donations tax
Donations tax is levied at a flat rate of 20% on the cumulative value of property donated since 1 March 2018, not exceeding R30m, and at a rate of 25% on the cumulative value of property donated since 1 March 2018, exceeding R30m.
The tax-exempt limit on donations by individuals will increase from R100 000 to R150 000. The last time the tax-exempt limit was increased was in 2007.
In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding a total of R20 000 – up from R10 000, which has applied since 2002.
Dispositions between spouses, where the recipient is a tax resident, donations between companies forming part of a South African group of companies, and donations to certain public benefit organisations are exempt from donations tax.
Treasury says in the Budget Review that the exemption on donations between spouses is being abused by high-net-worth individuals planning to cease to be South African tax residents.
These tax-avoidance arrangements involve 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 Income Tax Act. According to Treasury, the aim is to avoid both donations tax and the income tax on cessation of residency, thereby undermining the original policy intent of these provisions.
Treasury is therefore proposing 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.
No changes
The Budget Review does not propose to make any changes to the tax on dividends and interest income or to estate duty.
The rate of dividends tax remains at 20%. The tax is imposed on dividends paid by resident companies and by non-resident companies on shares listed on the Johannesburg Stock Exchange or other South Africa-licensed exchanges.
The income tax exemption on interest from a South African source remain limited to R23 800 a year for natural persons under 65 years of age or by an estate of a deceased person. For persons who are 65 years and older, the limit is R34 500 a year.
Estate duty is levied on the property of residents and the South African property of non-residents, less allowable deductions. The duty is levied on the dutiable value of an estate, at a rate of 20% on the first R30m, and at a rate of 25% above R30m.
A basic deduction of R3.5m is allowed in determining an estate’s liability for estate duty, as well as deductions for liabilities, bequests to public benefit organisations, and property accruing to surviving spouses.
