What the 2025/26 Budget Means for your Household and Wealth Plan

Retirement Annuities: You Can Now Contribute More Before Tax

This is one of the most direct planning opportunities in this year’s budget.

Previously, the annual tax-deductible limit on retirement fund contributions (including RAs, pension funds, and provident funds) was capped at R350,000. That cap has now increased to R430,000.

In practical terms, this means higher earners who can afford to contribute more now have additional room to do so without losing the tax benefit. Contributions to an RA reduce your taxable income, so contributing more means paying less tax in the year you contribute, while your money continues to grow free of income tax, dividends tax, and capital gains tax inside the fund.

For someone in the 45% tax bracket contributing an additional R80,000 per year, the immediate tax saving is R36,000. That is not a small number. The effect compounds significantly over time.

If you are not already maximising your RA contributions, this change is worth reviewing with us. The window between what you currently contribute and the new limit may represent meaningful untapped tax relief.

Tax-Free Savings Accounts: A Meaningful Increase in the Annual Limit

The annual contribution limit for Tax-Free Savings Accounts (TFSAs) has increased from R36,000 to R46,000. The lifetime limit remains in place, though this change effectively accelerates how quickly you can build a tax-sheltered investment base.

A TFSA remains one of the most powerful vehicles available to South African investors. Growth inside a TFSA, whether from interest, dividends, or capital gains, is entirely exempt from tax. There is no tax on withdrawal either. This makes it particularly valuable for long-term wealth building and for clients who have already optimised their RA contributions.

The additional R10,000 per year may seem modest, but invested consistently over a decade or more, the compounding effect inside a tax-free environment is material.

If you are not yet contributing the maximum annual amount to a TFSA, we would encourage you to revisit this. It is a straightforward, low-friction way to improve the tax efficiency of your overall investment portfolio.

Capital Gains Tax: Better Protection for Investors and Homeowners

Three changes here are worth noting, and each affects a different type of client.

Annual Exclusion

When you dispose of an investment asset and realise a capital gain, every South African individual is entitled to exclude a portion of that gain from tax. The annual CGT exclusion has increased from R40,000 to R50,000.

This means more of your gains each year fall outside the tax net entirely. For clients who are drawing down on investments, rebalancing portfolios, or disposing of assets in retirement, this higher exclusion reduces the CGT exposure on each transaction.

Primary Residence Exclusion

If you sell your primary home and make a profit on the sale, the first portion of that gain is excluded from CGT. That exclusion has increased from R2 million to R3 million.

This is a significant improvement for homeowners, particularly in areas where property values have grown substantially over time. Previously, any gain above R2 million on the sale of your home would attract CGT. Now that threshold has moved to R3 million, protecting more of the profit you have built up over years of ownership.

It is worth noting that the primary residence exclusion only applies to the property you ordinarily inhabit. It does not apply to holiday homes, investment properties, or vacant land.

Death CGT Exclusion

When a person passes away, their estate is treated as having disposed of all assets at market value on the date of death. This triggers a CGT calculation on any gains accumulated over their lifetime. The exclusion that applies in this situation has increased from R300,000 to R440,000.

This is a meaningful increase for estate planning purposes. The higher exclusion reduces the CGT liability that falls on your estate at death, which in turn preserves more of your wealth for your heirs. For clients with significant investment portfolios or appreciating assets, understanding how this interacts with the rest of your estate plan is important. We recommend reviewing this with us, particularly if your estate has grown considerably in recent years.

Income Tax Brackets: Adjusted, But Partially

South Africa’s income tax brackets have been adjusted in the 2025/26 budget. This provides some relief from what is commonly called bracket creep, where inflation pushes your salary into a higher tax bracket without any real increase in your purchasing power.

We will share the updated bracket table directly with clients on request, as the specific thresholds are detailed. The practical implication is that most salaried individuals should see a modest improvement in their monthly net pay, reflecting the reduced effective tax rate at various income levels.

That said, not all brackets were adjusted to fully offset inflation. Some clients in upper income bands may find the relief is less than anticipated. This is worth factoring into your cash flow planning for the year ahead.

Donations Tax: More Room to Transfer Wealth to your Family

Every South African individual can donate up to a certain amount per year without triggering donations tax. That annual exemption has increased from R100,000 to R150,000 per person.

The practical impact of this is best understood at a household level. A married couple, each donating up to their annual limit, could previously transfer R200,000 per year out of their combined estate without any donations tax liability. Under the new threshold, that same couple can now transfer R300,000 per year, entirely tax-free.

For families with an active estate planning strategy, this creates meaningfully more room to shift wealth to children or other beneficiaries over time. Consistent annual donations within the exemption limit are one of the most straightforward ways to reduce the size of a dutiable estate, which in turn reduces estate duty exposure when you pass away.

Donations tax still applies at 20% on cumulative amounts above the exemption up to R30 million, and at 25% beyond that. Structuring transfers correctly, particularly where trusts or multiple family members are involved, remains important. Speak with us before making significant transfers so we can ensure the approach is both tax-efficient and correctly documented.

VAT Registration Threshold: A Welcome Change for Small Business Owners

If you run a small business alongside your primary employment, or if your practice or consultancy has been approaching the VAT registration threshold, this change is relevant to you.

The compulsory VAT registration threshold has increased from R1 million to R2.3 million in taxable turnover over a 12-month period. This means smaller businesses are no longer required to register for VAT until they cross a much higher revenue mark.

The administrative burden and compliance cost of VAT registration is not insignificant. This change gives smaller business owners more breathing room before those obligations kick in. It also means pricing your services without VAT remains an option for longer, which can be a competitive advantage in B2C markets.

If your business was close to the old R1 million threshold, it is worth reviewing whether your VAT registration status needs to be updated or whether you qualify to deregister.

Single Discretionary Allowance: More Room to Move Money Offshore

The single discretionary allowance has increased from R1 million to R2 million per calendar year.

The SDA is the amount any South African resident can transfer abroad without requiring a tax clearance certificate or Reserve Bank approval. It covers a wide range of uses, including foreign travel, maintenance payments, gifts to family abroad, and offshore investments up to the allowable limit.

Doubling this threshold is a meaningful change, particularly for clients who have been building offshore investment exposure or supporting family members in other countries. Previously, transferring R2 million offshore in a single year required a foreign investment allowance application with SARS. Now that entire amount falls within the discretionary limit, simplifying both the process and the timing.

For clients with an offshore investment strategy, this is worth revisiting. The reduced administrative friction, combined with the ability to move larger amounts more efficiently, opens up planning options that were previously more cumbersome to execute.

If you have been considering offshore diversification or need to structure cross-border transfers, speak with us about how this fits into your broader plan.

Our View At CS Wealth

This budget contains more genuine planning opportunities than many in recent years. The increases to RA contribution limits, TFSA annual caps, and the expanded exclusions across capital gains and donations all create meaningful room for clients who are willing to act.

The challenge with budget changes is that they tend to produce a lot of noise. Everyone has an opinion, and not all of it is grounded in what the changes actually mean for your specific situation. The question we always return to is a simple one: given what has changed, are you getting the most from what is available to you?

We will be reaching out to clients individually where we see a meaningful opportunity or risk specific to their plan. In the meantime, if any of the above has raised questions or prompted you to think about a particular aspect of your finances, we would welcome the conversation.

Good planning is rarely about dramatic moves. It is about consistently making the most of the tools available to you.

Reach out to your CS Wealth advisor to discuss how these changes apply to your personal plan.

This newsletter is intended for informational purposes only and does not constitute financial advice. Individual circumstances vary and we recommend speaking with your advisor before making any changes to your financial plan. All figures and thresholds referenced are subject to final legislative confirmation.