Tax Planning
Decoding SARS’s New VAT & Turnover Tax Thresholds for Small Businesses
South Africa’s VAT registration thresholds and Turnover Tax limits have jumped significantly as of 1 April 2026 — here’s what small businesses need to know to stay compliant and take advantage.
By NomadicTax Research Team • 5-8 min read • September 9, 2026
## What’s Changing
- **Compulsory VAT registration threshold** has increased from **R1 million** to **R2.3 million** in annual taxable supplies. ([sars.gov.za](https://www.sars.gov.za/about/sars-tax-and-customs-system/budget/budget-2026-frequently-asked-questions/?utm_source=openai))
- **Voluntary VAT registration threshold** has been raised from **R50,000** to **R120,000** per annum. ([sars.gov.za](https://www.sars.gov.za/about/sars-tax-and-customs-system/budget/budget-2026-frequently-asked-questions/?utm_source=openai))
- The **Turnover Tax ceiling** also increased to **R2.3 million**, aligning it with the new VAT compulsory threshold. This allows many more small businesses to qualify for simplified taxation. ([sars.gov.za](https://www.sars.gov.za/businesses-and-employers/small-businesses-taxpayers/smme-connect-issue-14-april-2026/?utm_source=openai))
## Why This Matters
- **Reduced compliance burden:** Businesses previously required to register for VAT or Turnover Tax may now avoid these obligations if they remain under these higher thresholds.
- **Cash flow benefits:** Less frequent or lower filing obligations can help with working capital, especially for startups or small traders.
- **Strategic planning opportunities:** Being just under a threshold might be preferable depending on input tax claims and customer expectations. Conversely, higher sales may still necessitate VAT registration.
## Actionable Steps for Businesses
1. **Measure your 12-month taxable supplies** — review supplies over any continuous 12-month rolling period to see if you cross the R2.3 million limit. ([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/?utm_source=openai))
2. **Register for VAT if expected to exceed threshold:** voluntary registration may apply if expected to surpass R120,000 per annum but remain below R2.3 million. ([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/?utm_source=openai))
3. **Assess Turnover Tax:** if your turnover stays under R2.3 million, Turnover Tax may be easier and cheaper than standard income tax and VAT compliance. ([sars.gov.za](https://www.sars.gov.za/businesses-and-employers/small-businesses-taxpayers/smme-connect-issue-14-april-2026/?utm_source=openai))
4. **Plan for VAT exit if needed:** if you fall below thresholds, SARS may initiate deregistration; you’ll need to consider possible “exit VAT” obligations. ([sars.gov.za](https://www.sars.gov.za/about/sars-tax-and-customs-system/budget/budget-2026-frequently-asked-questions/?utm_source=openai))
## Examples
| Scenario | Annual Taxable Supplies | Before 1 April 2026 | After 1 April 2026 |
|---|---|---|---|
| A business sells R900,000 worth | R900,000 | Below old VAT compulsory threshold; no VAT required | Below new compulsory threshold; still no VAT needed but can choose voluntary registration. ([sars.gov.za](https://www.sars.gov.za/faq/should-i-register-for-vat-or-turnover-tax-see-our-practical-calculation-examples/?utm_source=openai)) |
| A business sells R2.2 million worth | R2,200,000 | Above old VAT compulsory threshold; VAT required | Just under new threshold; VAT registration not compulsory but can choose to register. |
| A business sells R2.5 million worth | R2,500,000 | VAT compulsory | VAT compulsory. |
## Important Dates & Practicalities
- Effective date for these changes is **1 April 2026**. ([sars.gov.za](https://www.sars.gov.za/about/sars-tax-and-customs-system/budget/budget-2026-frequently-asked-questions/?utm_source=openai))
- If your supplies fall beneath voluntary threshold post-legislation, SARS will notify you prior to initiating deregistration. The deregistration process requires final VAT return submissions, calculation of exit VAT if applicable, and possible ability to pay exit VAT over instalments. ([sars.gov.za](https://www.sars.gov.za/about/sars-tax-and-customs-system/budget/budget-2026-frequently-asked-questions/?utm_source=openai))
**Bottom line:** These threshold increases offer relief for small businesses — lighter compliance, improved cash flow, and more room to grow. But monitoring your sales, understanding whether to register or deregister, and staying current with obligations remain essential.