What advisers must know about the tax shift

South Africa’s Budget 2026 has ushered in one of the most significant waves of tax adjustments in more than a decade. For financial advisers, these shifts carry implications that extend far beyond simple compliance. The message is unambiguous: 2026 is the year to re-audit every client’s plan. From estate structures, higher donations tax thresholds to changes in capital gains tax exclusions and trust funding, to retirement strategies and long-term savings assumptions, the cumulative effect of these amendments demands renewed attention.

According to Ronald King, Head of Regulatory Affairs at PSG Wealth, the scope of the changes caught even seasoned practitioners by surprise. “Some of these limits haven’t changed since 2002,” he explains. “When the facts change, the financial plan must change. A plan that worked even two years ago may now be misaligned with the current tax environment.”

Capital gains increase significant

King believes the updates reflect a long-overdue recalibration. For example, the increase in the annual capital gains exclusion from R40 000 to R50 000, while appearing modest, has meaningful practical implications. 

Advisers dealing with estate planning often face significant liquidity constraints, especially in estates laden with property or share portfolios. “Liquidity is still one of the biggest pressure points in deceased estates,” he says. “When taxes, executor fees and capital gains are all added together, they can absorb as much as a third of the estate’s value. Any relief on the capital gains side gives advisers more breathing room.”

The rise in the death exclusion to R440 000 further strengthens that position. It allows advisers greater latitude in determining which assets should be liquidated and which might be rolled over to a surviving spouse. The increased threshold also improves the ability to structure estates in a way that preserves generational wealth rather than forcing unnecessary asset disposals. “We finally have some room to manoeuvre when it comes to managing tax leakage at death,” King says.

The impact of donations tax changes

Perhaps even more consequential for advisers is the increase in donations tax exemptions. These ceilings have long influenced how trusts are capitalised, how inter-spousal planning is approached, and how legacy structures are maintained. King notes that many clients rely on annual donations to reduce loan accounts attached to trusts or to bolster trust liquidity. “A lot of families use donations as a tool to gradually shift value to the next generation,” he says. “Changes to these exemptions should prompt advisers to revisit those structures sooner rather than later.”

Retirement and savings reforms also feature prominently in this year’s adjustments, requiring fresh technical analysis. While some proposals are still out for consultation, King emphasises that advisers cannot afford a wait-and-see approach. “The environment is shifting,” he cautions. “It’s not enough to react once new rules are enacted. Advisers should already be reviewing assumptions, client objectives and long-term projections.”

How estates can benefit

An important area that continues to cause confusion among clients is the treatment of various investment vehicles at death. King says that while retirement annuities fall outside the estate for estate duty purposes, tax-free savings accounts (TFSAs) do not. “The tax-free savings account forms part of the estate; the retirement annuity does not,” he explains. “It’s a simple distinction, but one many clients misunderstand and that’s why getting proper advice is so essential.”

Although this distinction is not new or unique to the latest Budget, King believes it highlights a broader point: advisers must ensure clients are not operating under outdated assumptions. “Sometimes it’s the basics that advisers aren’t communicating clearly,” he notes. “That’s where your good adviser and your average adviser really start to separate – in how well they guide clients on fundamentals.”

A more directly Budget-related change is the increase in the maximum deductible retirement annuity (RA) contribution, rising from R350 000 to R430 000. The percentage limit remains the same at 27.5% of taxable income, but the cap now accommodates higher earners more effectively. “In the past, someone earning R1,8m could contribute 27.5%, but the tax deduction would stop at R350 000,” King explains. “Now the cap is R430 000 – a significant jump. A client contributing an extra R80 000 could save
R36 000 in tax. That’s meaningful.”

The change also counters a growing public narrative that higher-income earners should not benefit from retirement incentives. King views the adjustment as a strong signal: “There’s been a lot of noise saying wealthy people will save anyway, so they shouldn’t get the tax break. This increase shows that National Treasury doesn’t agree and that’s a positive message.”

Collective investment schemes

Another major development on the regulatory front involves collective investment schemes (CIS). For nearly two years, SARS explored taxing certain CIS transactions as revenue rather than capital gains, a move that could have resulted in a punitive 45% tax rate for some funds. “There were schemes buying in the morning and selling that afternoon,” King says. “Legally, SARS had a point but taxing everything at 45% would have wiped out half the gains in many funds.”

Industry engagement on Treasury committees ultimately shifted the outcome. Treasury has now indicated that all CIS gains will be taxed as capital, regardless of holding period. “It’s a very positive step,” King says. “Treasury listened, understood the unintended consequences, and adjusted course. That’s good for the industry and good for the economy.”

As advisers absorb these developments, King emphasises that their role is more critical than ever. “There’s a lot here clients need to understand,” he says. “And advisers need to be the ones guiding them.”