Encouraging signals for long-term financial planning from the 2026 Budget Speech

The 2026/27 Budget proposals tabled by National Treasury reflect a continued policy focus on strengthening long‑term savings behaviour and improving certainty within South Africa’s investment and retirement landscape. From a financial planning perspective, the Minister’s proposals are, in large part, encouraging, particularly in how they seek to incentivise disciplined saving and responsible financial planning among South Africans.

Encouraging saving and retirement provision

The central theme of the 2026 Budget is the encouragement of long‑term saving through enhanced tax‑efficient investment limits. Proposed changes include:

• An increase in the tax‑free investment annual limit from R36 000 to R46 000
• An increase in the retirement fund contribution deduction limit from R350 000 to R430 000
• An increase in the retirement interest de minimis threshold for annuitisation from R247 500 to R360 000
• An increase in the living annuity de minimis commutation threshold from R125 000 to R150 000, allowing qualifying annuitants to cash in smaller annuities

From a financial planning perspective, these proposals are among the most encouraging aspects of the Budget. Increasing contribution limits directly supports improved retirement adequacy, while higher tax‑free investment thresholds provide accessible savings vehicles for a broader range of investors. Importantly, these measures reinforce the message that long‑term saving remains a national priority.

One trick missed by National Treasury is not increasing the R500 000 lifetime limit of tax-free investments. South Africans are aware that they effectively have “one bite at this cherry,” in that any withdrawal taken from your tax-free investments account cannot be replaced - at least not by further reducing your annual, and more importantly, your lifetime limit. This lifetime limit often proves to be a barrier for South Africans who want to invest in tax-free investments but are concerned about needing to access some or all the funds in the short-term. The R500 000 lifetime limit has yet to be adjusted from the time it was first introduced in 2015, and at this stage, we hope to see the limit increase implemented in the near future.

Capital gains tax: Improved relief at key life stages

The Budget proposes several increases to capital gains tax (CGT) exclusions, which may materially improve after‑tax outcomes for individuals:

• The primary residence exclusion is proposed to increase from R2 million to R3 million
• The CGT exclusion on death is proposed to increase from R300 000 to R440 000
• The annual CGT exclusion is proposed to increase from R40 000 to R50 000
• The small business CGT exclusion, particularly relevant to individuals over age 55, is proposed to increase from R1.8 million to R2.7 million
• CGT exclusion for small business asset disposal will increase from R10 million to R15 million

These proposed increases are meaningful from a financial planning and estate planning perspective. By providing enhanced relief at critical transition points such as retirement, death, or the disposal of a business, National Treasury is reducing tax friction on accumulated capital. This supports the preservation of wealth and improves planning certainty for individuals and families alike.

Donations tax: Greater flexibility for lifetime planning

National Treasury has proposed increases to donations tax exemptions, with the annual exemption for natural persons increasing from R100 000 to R150 000, and the exemption for legal entities increasing from R10 000 to R20 000.

These adjustments provide additional flexibility for individuals engaging in structured estate planning. By enabling greater lifetime gifting without immediate tax consequences, the proposals encourage proactive planning while still maintaining appropriate tax safeguards.

Living Annuities: Clarifying existing rules

National Treasury has proposed clarifying that the R125 000 de minimis rule for commuting living annuities applies per insurer or fund, rather than per individual policy, to prevent early cash‑outs through multiple small annuities.

This clarification reinforces the core purpose of living annuities - to provide sustainable retirement income. From a legal perspective, it strengthens the integrity of the retirement framework while still preserving limited flexibility for smaller annuity values.

Collective Investment Schemes: Moving toward greater tax certainty

Once again National Treasury shows that it is serious about helping South Africans increase their savings by indicating that returns earned by collective investment schemes and retail hedge funds will be taxed fully as capital rather than income. This would generally result in a lower effective tax rate and provides greater certainty for long‑term investors.

Qualified hedge funds, which require high minimum investments, are proposed to be excluded from this regime.

Tax certainty is fundamental to sound investment decision‑making. Treating qualifying collective investment returns as capital aligns tax outcomes with long‑term investment behaviour and generally results in lower effective tax rates.

Global minimum tax: Limited direct impact on individual financial planning

Government has confirmed its intention to introduce updated global minimum tax rules from the 2026/27 tax year, aimed primarily at multinational corporates that shift profits to low‑tax jurisdictions. While these measures are unlikely to have a direct impact on individual investors, National Treasury’s revised revenue expectations suggest a more moderate fiscal effect than initially anticipated.

In summary

Reviewed as a whole, the 2026 Budget proposals reflect a consistent and constructive policy approach aimed at encouraging long‑term saving, improving retirement outcomes, and providing greater certainty for investors.

As it pertains to financial planning, the Minister’s Budget is largely encouraging. The proposed increases to savings and investment thresholds signal a clear intention to support South Africans in building long‑term financial security. While these measures remain proposals and may still be refined before implementation, their overall direction aligns well with the principles of disciplined saving, responsible planning, and sustainable retirement provision.