Budget 2026: Godongwana withdraws R20 billion tax hike

Finance Minister Enoch Godongwana has backtracked on his 2025 threat to increase taxes by R20 billion, thanks to the tax man.

After failed attempts to increase the value-added tax rate last year, Godongwana warned that if revenue fell short this year, his hand would be forced to raise taxes.

But the South African Revenue Service (SARS) has made good on its promise to increase collections, with revenue up R 21.3 billion, more than was estimated a year ago.

Godongwana announced the tax relief when he tabled the 2026 Budget in Parliament on Wednesday.

In the current year, most fiscal metrics, including revenue, deficit, and debt-service costs, are better than projections made in the medium-term budget policy statement in November.

Minister Enoch Godongwana has walked back warnings of tax increases in 2026, with revenue collection stronger owing to stronger economic growth and commodity price increases.

"The improving fiscal position allows us enough room to withdraw the proposed tax increases, without putting fiscal sustainability or economic activity at risk."

After two years of no inflationary relief, personal income tax brackets and medical tax credits have been adjusted.

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"We are also proposing additional tax measures to ease the financial burden on households and businesses, by adjusting personal income tax brackets and rebates fully in line with inflation.

Higher-than-expected net VAT, corporate Income Tax, and Dividends Tax collections improved the in-year outlook, although Personal Income Tax and specific excise duty collections are expected to fall short of the 2025 budget projections.

Supported by new technology, SARS has registered 1.3 million new taxpayers, who have contributed almost R5 billion to net revenue.

The minimum tax-paying threshold has now been raised to R245,100 per year, while medical tax credits will increase from R364 to R376 for the first two members.