This first of two articles summarises changes made in the 2026/2027 financial year for individuals as published by SARS. The second article will summarise the changes made for companies.
INCOME TAX: INDIVIDUALS AND TRUSTS
Tax rates from 1 March 2026 to 28 February 2027
Individuals and Special Trusts
Taxable Income (R) Rate of Tax
1 – 245 100 18% of taxable income
245 101 – 383 100 44 118 + 26% of taxable income above 245 100
383 101 – 530 200 79 998 + 31% of taxable income above 383 100
530 201 – 695 800 125 599 + 36% of taxable income above 530 200
695 801 – 887 000 185 215 + 39% of taxable income above 695 800
887 001 – 1 878 600 259 783 + 41% of taxable income above 887 000
1 878 601 and above 666 339 + 45% of taxable income above 1 878 600
Rebates for individuals
Primary R17 820
Secondary (persons 65 years and older) R9 765
Tertiary (persons 75 years and older) R3 249
Age Tax Threshold
Below age 65 R99 000
Age 65 to below 75 R153 250
Age 75 and above R171 300
Trusts (other than Special Trusts) rate of tax = 45%
PROVISIONAL TAX
A provisional taxpayer is any person who earns income that is not remuneration, an allowance, or advance payable by the person’s principal; or who earns income by way of remuneration from an unregistered employer. An individual is not required to pay provisional tax if he or she does not carry on any business, and the individual’s taxable income:
- will not exceed the tax threshold for the tax year; or
- from interest, dividends, foreign dividends, rental from the letting of fixed property, and remuneration from an unregistered employer, will be R30 000 or less for the tax year.
Provisional taxpayers must submit an estimation of total taxable income for the year of assessment. Deceased estates are not provisional taxpayers.
RETIREMENT FUND LUMP SUM WITHDRAWAL BENEFITS
Taxable Income (R) Rate of Tax
1 – 27 500 0% of taxable income
27 501 – 726 000 18% of taxable income above 27 500
726 001 – 1 089 000 125 730 + 27% of taxable income above 726 000
1 089 001 and above 223 740 + 36% of taxable income above 1 089 000
Retirement fund lump sum withdrawal benefits consist of lump-sums from a pension, pension preservation, provident, provident preservation, or retirement annuity fund upon withdrawal (including assignment in terms of a divorce order).
Tax on a specific retirement fund lump sum withdrawal benefit (lump sum X) is equal to:
- The tax determined by applying the tax table to the aggregate of lump-sum X, plus all other retirement fund lump sum withdrawal benefits accruing from March 2009, all retirement fund lump sum benefits accruing from October 2007, and all severance benefits accruing from
March 2011; less: - The tax determined by applying the tax table to the aggregate of all retirement fund lump sum withdrawal benefits accruing before lump-sum X from March 2009; all retirement fund lump sum benefits accruing from October 2007; and all severance benefits accruing from March
2011.
RETIREMENT FUND LUMP SUM BENEFITS OR SEVERANCE BENEFITS
Taxable Income (R) Rate of Tax
1 – 550 000 0% of taxable income
550 001 – 770 000 18% of taxable income above 550 000
770 001 – 1 155 000 39 600 + 27% of taxable income above 770 000
1 155 001 and above 143 550 + 36% of taxable income above 1 155 000
Retirement fund lump sum benefits consist of lump-sums from a pension, pension preservation, provident, provident preservation, or retirement annuity fund on death, retirement, or termination of employment due to reaching the age of 55, sickness, accident, injury, incapacity, redundancy, or termination of the employer’s trade.
Severance benefits consist of lump-sums from or by arrangement with an employer because of relinquishment, termination, loss, repudiation, cancellation, or variation of a person’s office or employment.
Tax on a specific retirement fund lump sum benefit or a severance benefit (lump sum or severance benefit Y) is equal to:
- The tax determined by applying the tax table to the aggregate of amount Y, plus all other retirement fund lump sum benefits accruing from October 2007, all retirement fund lump sum withdrawal benefits accruing from March 2009, and all other severance benefits accruing from March 2011; less:
- The tax determined by applying the tax table to the aggregate of all retirement fund lump sum benefits accruing before lump-sum Y from October 2007; all retirement fund lump sum withdrawal benefits accruing from March 2009; and all severance benefits accruing before severance benefit Y from March 2011.
TAX-FREE INVESTMENTS
Investments in tax-free investment financial instruments or policies by individuals, deceased estates, and insolvent estates of individuals are limited to R46 000 per tax year. Amounts received by or accrued on tax free investments are exempt from income tax (including tax on capital gains).
Dividends
Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax, at a rate of 20%, must be withheld by the entities paying the dividends to the individuals. Dividends received by South African–resident individuals from REITs (listed and regulated property-owning companies) are subject to income tax, and non-residents in receipt of those dividends are subject only to dividends tax.
Foreign Dividends
Most foreign dividends received from foreign companies by individuals (if the shareholding amounts to less than 10% in the foreign company) are taxable at a maximum effective rate of 20%. No deductions are allowed for expenditure to produce foreign dividends.
Interest Exemptions
An exemption from income tax applies to interest from a South African source, earned by any natural person under 65 years of age or by an estate of a deceased person, up to R23 800 per annum. For persons who are 65 years and older, this exemption applies to interest of up to R34 500 per annum. Also exempt from income tax is interest earned by non-residents who are not physically present in South Africa for more than 183 days during the 12-month period before the interest accrues or is received. Moreover, the exemption applies only if the interest-bearing debt is not effectively connected to a permanent establishment (such as a fixed place of business) in South Africa.
DEDUCTIONS
Retirement Fund Contributions
Amounts contributed to pension, provident, and retirement annuity funds during a year of assessment are deductible by members of those funds. Amounts contributed by employers and taxed as fringe benefits are treated as contributions by the individual employees.
The deduction is limited to 27.5% of the greater of the amount of remuneration for employees’ tax, or taxable income (both exclude retirement fund lump sums and severance benefits). The deduction is further limited to the lower of R430 000 or 27.5% of taxable income, before the inclusion of a taxable capital gain. Any contributions exceeding the limitations are carried forward to the immediately following year of assessment, and are deemed to be contributed in that following year. The amounts carried forward are reduced by contributions set off against retirement fund lump sums and retirement annuities.
Medical and Disability Expenses
In determining tax payable, individuals can deduct a rebate based on monthly contributions to medical schemes. The rebate can be used only by the individual who paid the contributions, up to R376 for each of the first two persons covered by those medical schemes, and R254 for each additional dependant. This rebate is referred to as a medical scheme fees tax credit.
A further rebate that is available for medical expenses is the additional medical expenses tax credit. In the case of:
- An individual who is 65 years and older, or an individual, his or her spouse, or his or her child, who is a person with a disability, the individual is allowed a medical expenses tax credit to the value of 33.3% of the sum of qualifying medical expenses paid by the individual, and the amount by which the medical-scheme contributions paid by the individual exceeds three times the medical scheme fees tax credits for the tax year; or
- Any other individual, who is allowed a medical expenses tax credit to the value of 25% of the sum of the qualifying medical expenses paid by the individual, and the amount by which the medical scheme contributions paid by the individual exceeds four times the medical scheme fees tax credits for the tax year, limited to the amount that exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).
DONATIONS
Deductions for donations to certain public benefit organisations are limited to 10% of taxable income (excluding retirement fund lump sums and severance benefits). The amount of donations exceeding 10% of the taxable income is treated as a donation to qualifying public benefit organisations in the following tax year.
ALLOWANCES
Subsistence Allowances and Advances
If the recipient of a subsistence allowance or advance is obliged to spend at least one night away from his or her usual place of residence because of business, and the accommodation to which that allowance or advance relates is in the Republic of South Africa, and the allowance or advance is granted to pay for:
- Meals and incidental costs, an amount of R595 is deemed to have been expended per day; or
- Incidental costs only, an amount of R184 is deemed to have been expended per day.
If the accommodation to which that allowance or advance relates is outside the Republic of South Africa, a specific amount per country is deemed to have been expended. Details of these amounts are published on the SARS website (www.sars.gov.za), under the Legal Counsel > Secondary Legislation > Income Tax Notices webpages.
If the recipient of the subsistence allowance or advance must spend a part of a day away from his or her usual place of work or employment on official business, a reimbursement or advance for expenditure actually incurred by the recipient is exempt. This exemption applies if the recipient is allowed by his or her principal to incur expenditure on meals and other incidental costs for that part of the day, and the amount of the reimbursement does not exceed R184.
Travelling Allowance
Rates per kilometre, which can be used to determine the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined using the following table.
Note:
- 80% of the travelling allowance must be included in the employee’s remuneration to calculate PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business.
- No fuel cost is allowed if the employee has not borne the full cost of fuel used in the vehicle, and no maintenance cost can be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).
- The fixed cost must be reduced proportionally (pro rata) if the vehicle is used for business for less than a full year.
- The actual distance travelled during a tax year, and the distance travelled for business, proven by a logbook, are used to determine the costs that are allowed against a travelling allowance.
Alternatively, if an allowance or advance is based on the actual distance travelled by the employee for business, no tax is payable on an allowance paid by an employer to an employee, up to R4.95 per kilometre, regardless of the value of the vehicle. However, this alternative is not available if the employer paid the employee other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) regarding the vehicle.
OTHER DEDUCTIONS
Other than the deductions set out above, an individual can claim deductions only against employment income or allowances in limited specified situations, e.g. bad debt in respect of salary.
FRINGE BENEFITS
Employer-Owned Vehicles
- The taxable value is 3.5% of the cash cost, including VAT, of each vehicle per month.
- If the vehicle is:
» Under a maintenance plan when the employer acquired it, the taxable value is 3.25% of the determined value; or
» Acquired by the employer under an operating lease, the taxable value is the cost incurred by the employer under the operating lease plus the cost of fuel.
- 80% of the fringe benefit must be included in the employee’s remuneration to calculate PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business.
- On assessment, the fringe benefit for the tax year is reduced by the ratio of the distance travelled for business, proven by a logbook, divided by the actual distance travelled during the tax year.
- On assessment, there is further relief for the cost of the licence, insurance, maintenance, and fuel for private travel — if the full cost was borne by the employee, and if the distance travelled for private purposes is proven by a logbook.
Interest-Free or Low-Interest Loans
The difference between interest charged at the official rate and the actual amount of interest charged must be included in gross income.
Residential Accommodation
The value of the fringe benefit to be included in gross income must be the lower of the benefit calculated by applying a prescribed formula, or the cost to the employer if the employer does not have full ownership of the accommodation. The formula will apply if the accommodation is owned by the employee, but it does not apply to holiday accommodation hired by the employer from non-associated institutions.