Will 2026’s Budget keep its holding pattern?

Many of the fiscal pressures that defined 2025’s Budget Speech will return when Finance Minister Enoch Godongwana delivers his 2026 Budget Speech. South Africa continues with a careful balancing act, attempting to stabilise public finances while avoiding measures that could further strain an already pressured tax base and stoke political opposition.

While last year’s global minimum corporate tax, arguably 2025’s biggest budget change, was projected by National Treasury to raise around R8 billion over a three-year period, it may be a limited salve considering only a few multinationals are materially affected. There isn’t much more to squeeze from taxpayers, so Budget 2026 will be less about dramatic tax changes and more about fiscal consolidation, compliance, and targeted interventions.

Stabilising debt levels, reducing the budget deficit, and avoiding further pressure on a stagnant tax base remain central objectives, leaving little space for surprises or dramatic moves. How does that colour expectations for the budget speech in late February?

More income tax bracket freezes

As much as taxpayers hope for inflation-linked relief, fiscal constraints make such adjustments unlikely. For the third consecutive year, personal income tax brackets may remain unchanged, raising revenue through fiscal drag without announcing explicit tax hikes. Salary raises may come to bite employees when they bump into higher tax brackets.

A gradual shift for medical tax brackets

Treasury tends to be prudent and long-term. Despite opposition that could keep National Health Insurance (NHI) stuck in legal fights, Treasury may start incrementally changing caps or real-value erosion to eventually phase out medical tax credits without destabilising household finances overnight.

No change, but more debate, over VAT

After encountering strong political and social opposition last year, Treasury knows that VAT increases are still unpalatable, particularly in a coalition-driven environment. But it may also resist expanding VAT zero-rating to more basic goods, avoiding shrinking current revenue, even though cost-of-living pressures may force renewed debate with the Presidency.

Stability for corporate tax

Protecting the corporate tax base means tax rates are expected to remain unchanged. Treasury is more likely to continue focusing on base-broadening, closing loopholes, and enforcing anti-avoidance rules, particularly among multinational profit shifting and illicit trade.

Freeze or modest fuel levy increase

 Even though the state has voiced a desire for a R14/litre petrol price, pressure is instead mounting on the fuel levy as a revenue source. Budget 2026 may introduce a small, inflation-linked increase, although a continued freeze remains possible because of cost-of-living concerns and balancing revenue needs against fuel’s inflationary impact on the economy.

Increases and enforcement for sin taxes

Excise duties on alcohol and tobacco (aka. sin taxes) may increase above inflation once again. But these revenues are at risk from illicit trade, recently reflected in British American Tobacco (BAT)’s decision to close its local manufacturing. Treasury knows that illicit trade is a significant source of revenue leakage, possibly prompting more meaningful enforcement.

Incremental adjustments to carbon tax

South Africa’s carbon tax framework is likely to see incremental adjustments, either through modest rate increases or tighter allowances, rather than major structural reform. This supports the government’s climate commitments while avoiding excessive cost burdens on business during a period of fragile economic recovery.

ETI moves with the minimum wage

The national minimum wage will soon increase to R30.23 per hour—R4,836.80 for a 160-hour month. The current Employment Tax Incentive (ETI) maximum qualifying income band (R5,500-R7,499.99) still broadly aligns with minimum-wage earnings. Still, Treasury may once again adjust ETI thresholds or incentive values to support youth employment.

SARS’ quiet revenue strategy continues

SARS will continue its winning strategy of modernisation, digital infrastructure, and data-driven compliance initiatives, as well as aggressive enforcement campaigns, improved debt collection, closing loopholes and tackling illicit trade. This approach supports fiscal consolidation while signalling a commitment to fairness and efficiency in the tax system.

After last year’s pushback over proposed VAT increases, Treasury will probably remain conservative, looking for minor gains and redoubling on winning strategies. For employers, payroll professionals and taxpayers alike, the key theme will be continuity, with incremental adjustments layered onto a familiar tax framework.

Overall, Budget 2026 is shaping up to be a pragmatic, growth-conscious budget focused on stabilising public finances without overburdening taxpayers. It will hold the pattern set in previous years, emphasising administrative efficiency, targeted incentives, and disciplined spending over sweeping tax reforms.