The National Treasury’s efforts to prioritise the repayment of South Africa’s national debt, by decreasing spending and increasing revenue, have paid off, Finance Minister Enoch Godongwana told Parliament on Wednesday.
The budget deficit - the difference between government revenue and spending - has narrowed, and debt-service costs are also falling. But in 2026, the government will still have to spend R432.4-billion on debt repayments and interest.
Although the government will have to borrow money to fund the budget shortfall, the amount borrowed in 2026 will decrease to R380-billion, from R563-billion in 2025.
The economy is expected to grow by 1.6% in 2026 (taking inflation into account), up from an estimated 1.4% in 2025. Inflation is expected to be around 3.4% this year.
Thanks to higher-than-expected revenue in 2025, a plan to increase income taxes to collect an extra R20-billion has been scrapped. And for the first time since 2024, income tax brackets and rebates will be increased in line with inflation, which means people will not have to pay more tax if their salaries and wages increase by inflation.
But excise duties on tobacco and alcohol go up in line with inflation. This means tax on a 20-pack of cigarettes rises from R22.81 to R23.58, and tax on a 340 millilitre can of beer or cider increases by 8c.
Fuel levies also go up in line with inflation. For instance, the general fuel levy will go up by 9c a litre for petrol and 8c a litre for diesel.
People will be encouraged to save more through an increase in the annual tax-free savings account contribution limit to R46,000 from R36,000. The limit to retirement fund deductions will also be raised from R350,000 to R430,000, allowing people to invest more in their retirement, on a tax-free basis.
Small businesses will only be required to register for VAT when their turnover exceeds R2.3-million. Previously, the threshold was R1-million.
About 60% of the government’s main budget of R1.95-trillion will be spent on what the government calls the “social wage”, which includes education, healthcare, and social grants.
R26-billion will be allocated to the HIV/AIDS programme over the next three years, to prevent mother-to-child transmission and provide antiretroviral medicines.
Hundreds of people protested outside Parliament ahead of the budget speech. Photo: Ashraf Hendricks
Published originally on GroundUp .
Correction on 2026-02-25 19:01
This article previously incorreclty stated the Tax Free Savings Account limit has been increased to R47,000. The correct figure is R46,000.
