Navigating the new tax regulations for better savings strategies

Recent regulatory changes give investors an opportunity to strengthen their local and global savings strategies. Effective March 1, 2026, both the annual contribution limit for tax-free savings accounts (TFSAs) and the tax-deductible retirement contribution threshold have been increased, allowing you to save more while benefiting from enhanced tax efficiencies. In addition, an increase in the single discretionary allowance gives South Africans greater flexibility when investing offshore. Together, these changes create more opportunity for you to save what you can now, to improve your financial future.

Increased TFSA and retirement savings allowances

On 1 March 2015, the South African National Treasury introduced tax-free savings accounts (TFSAs) to encourage higher levels of household saving. Since 1 March 2026, the annual limit for contributions for these products has increased by R10 000 to R46 000 per year. The unused portion does not roll over to the subsequent year, and the lifetime contribution limit to these products remains at R500 000.

Any growth on investments in these products is tax-exempt, meaning that over the long term, the accumulated value of a TFSA typically outstrips that of a taxed investment product (assuming they comprise similar underlying funds and performance). The difference can be material, as no income tax, dividend tax or capital gains tax needs to be paid on the returns generated by these investments. This benefit becomes particularly pronounced over longer investment horizons – typically periods of seven years or more. And you don’t need a lot of money to start saving with a TFSA. Start with what you can now – even if you aren’t able to achieve the maximum tax benefit, you will still benefit from tax-free growth on what you have managed to invest.

Retirement may feel far away, but today’s choices shape tomorrow’s security. Under National Treasury’s regulatory framework, a retirement annuity is a tax-advantaged retirement product governed by the South African Pension Funds Act, which is designed to promote long-term savings by offering significant tax deductions while strictly preserving funds and dictating how your capital is paid out at retirement.

Contributions to pension funds, provident funds and retirement annuities are tax deductible, and as a member of these funds you receive attractive annual tax benefits on contributions of up to 27.5% of your taxable income (capped at R430 000 per tax year). These small, consistent savings can make a big difference over time. The new limit of R430 000 came into effect on 1 March 2026, and the advantage is that a greater portion of member contributions qualifies for immediate tax relief.

The advantages of the two-pot retirement system

The two-pot retirement system, introduced on September 1, 2024, offers further incentives to those saving for retirement:

• Emergency savings: Individuals making monthly or yearly contributions have access to their savings component. But it’s important to remember that accessing retirement savings today has real consequences for your future. Even small withdrawals repeated over time have a big retirement impact.
• Increased savings retention: The retirement component is safeguarded against pre-retirement withdrawals, keeping you invested in the market and allowing you to benefit from the power of compounding.
• Encouragement to participate in retirement savings: The two-pot system offers liquidity through the savings component, making it a more attractive option for those who would otherwise avoid saving for retirement due to liquidity concerns.
• Tax relief for contributions: Contributions made to retirement funds still benefit from tax incentives, encouraging saving and reducing taxable income while promoting long-term financial growth.

Increase in single discretionary allowance limits

The single discretionary allowance (SDA) was introduced by the South African Reserve Bank (SARB) and formally implemented in 2008 as part of the country’s exchange control reforms. South African residents receive a new allowance every calendar year, which may be used for any offshore purpose – including offshore investments and foreign expenditure – without requiring prior approval from the SARB or tax clearance from the South African Revenue Service (Sars).

Earlier this year, National Treasury announced an increase in the SDA from R1 million to R2 million. When making use of the higher limit, there are a few important considerations to keep in mind:

• For the 2026 calendar year, individuals are entitled to utilise the full R2 million allowance, which came into effect on 8 April 2026.
• The SDA applies to South African resident individuals aged 18 and older. While minors do not qualify for the full SDA, their travel allowance has increased from R200 000 to R400 000.
• The allowance applies to offshore investments as well as any foreign travel-related expenditure. These amounts should therefore be taken into account when determining how much remains available for investment.

If you want to invest more than R2 million offshore, you can do so by applying to SARS for a tax clearance certificate under the foreign investment allowance, which permits up to R10 million in additional offshore investment annually. Any amount exceeding R12 million requires specific approval from the SARB.

Stay up to date to maximise your savings opportunities

Legislation pertaining to investments is not static. Enjoying savings through tax breaks is therefore an ongoing habit of staying informed of regulatory changes – and not a once off act. This allows you to take advantage of these developments and realise your savings objectives. A financial adviser can help you to navigate the shifting allowances and requirements, as well to offer information and guidance through a tailored plan that maximises the opportunities available to meet your financial goals.

* Berry is the head of Sales at PSG Wealth.

PERSONAL FINANCE