Here’s how different South Africans should be thinking about the new tax year.
Image: File photo.
As South Africans prepare for the 2026 Budget Speech, much of the focus will be on whether government adjusts tax tables to compensate for last year’s bracket creep and whether the Tax-Free Savings Account (TFSA) limits will be increased.
While these policy decisions matter, what ultimately determines financial wellbeing is how households respond to them.
Here’s how different South Africans should be thinking about the new tax year.
We anticipate a possible increase in the TFSA limit. However, even if this does not materialise, fully utilising the existing allowance remains one of the most powerful long-term wealth-building tools available. A tax-free investment, compared to a taxed investment of the same type, can result in approximately 25% higher value over time due to the compounding of untaxed growth.
Investing at the start of the tax year rather than the end can increase the future value of the investment by as much as 16% at maturity. The difference is not about contribution size, rather time in the market, and the new tax year presents a strategic reset point.
We expect government to adjust tax tables to offset bracket creep from last year. This could temporarily improve disposable income, which should be used wisely.
In a declining interest rate environment, households should prioritise paying high-interest debt, making small additional repayments on bonds or vehicle finance, and rebalancing portfolios to improve tax efficiency. Even small additional payments toward debt can significantly reduce both repayment term and total interest paid in the long term.
Tax relief should strengthen your balance sheet, not expand lifestyle costs.
One of the most effective ways to reduce taxable income remains additional voluntary contributions to a Retirement Annuity (RA). Maximising retirement contributions reduces your current tax liability, increases long-term retirement capital and improves portfolio tax efficiency.
With ongoing pressure on state finances, individuals must increasingly self-fund their retirement outcomes, and the new tax year is the ideal time to reassess contribution levels.
Given delays around the implementation of the National Health Insurance (NHI), we anticipate that medical tax credits will remain in place for now. The start of the tax year provides an opportunity to reassess medical aid plan suitability and contribution levels. Medical tax credits still represent meaningful relief and should be factored into total tax planning.
The Budget can provide marginal relief but cannot solve household financial strain on its own. Strategic decisions made in March often matter more than policy announcements made in February.
Reeona Chetty, Head of Advice at Vouch.co.za
PERSONAL FINANCE