Overview of Threshold Changes
- VAT Compulsory Registration Threshold: Previously set at R1 million per annum, this has been raised to R2.3 million, effective 1 April 2026. (sars.gov.za)
- Voluntary VAT Registration Threshold: Increased from R50,000 to R120,000 per annum, also effective 1 April 2026. (sars.gov.za)
- Turnover Tax Regime Ceiling: The turnover tax threshold for micro-businesses has also moved up to R2.3 million, widening the eligibility for this simplified regime. (sars.gov.za)
What This Means in Practice
For Small Businesses Making Tax Decisions
- If your annual taxable supplies are now below R2.3 million, you are not required to register for VAT. This may reduce your compliance burden if you were formerly above the old R1 million threshold but under the new one.
- However, if your business makes taxable supplies between R120,000 and R2.3 million, you may opt in (voluntary registration) to claim VAT input credits. Consider whether your customers expect you to be VAT-registered.
For Micro-Businesses Under Turnover Tax
The turnover tax rates are as follows (year of assessment beginning 1 March 2026 for individuals; 1 April 2026 for companies):
| Turnover Range (ZAR) | New Tax Rate |
|---|---|
| R0 – R600,000 | 0% |
| R600,001 – R950,000 | 1% above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% above R950,000 |
| R1,400,001 – R2,300,000 | R12,500 + 3% above R1,400,000 |
If your turnover does not exceed R2.3 million, you now qualify for turnover tax which simplifies tax reporting and reduces administrative costs. (sars.gov.za)
Actionable Steps
- Review Your Turnover: Calculate your last 12 months’ taxable supplies. If you're between R1 million and R2.3 million, the new thresholds change your obligations.
- Assess Trade-offs:
- Being VAT registered gives input credit benefits but adds paperwork, pricing responsibilities, and compliance risk.
- Sometimes clients will only deal with VAT vendors, so voluntary registration may offer commercial advantages.
- Update Business Systems: Accounting software, invoicing systems, and quoting templates should reflect whether you're registered or not.
- Ensure Compliance Deadlines: These changes took effect 1 April 2026—if you were relying on prior thresholds, ensure you’ve transitioned properly.
Example Scenario
- Business A: Had taxable supplies of R1.8 million per annum. Under the old system, VAT registration was compulsory and turnover tax wasn’t available. Under the new rules, VAT registration is still required but you also qualify for the turnover tax regime if desired.
- Business B: Has taxable supplies of R900,000. Under the old system, you would have already been VAT-registered or eligible. Under the new threshold, compulsory VAT registration no longer applies, giving you room to make a decision depending on customer expectations.
Key Takeaways
- Budget 2026 in South Africa brings meaningful relief to many small business owners—new thresholds reduce compulsory obligations and open simpler taxation paths.
- Structure your operations to benefit—if input VAT claims are low, you may choose to remain unregistered; but registration can give you trading leverage.
- Be proactive—these changes are in effect, and failure to adjust could mean unnecessary tax, costs, or missed opportunities.
Sources: SARS (Budget FAQ and VAT guidance), National Treasury Budget 2026. (sars.gov.za)