The 2026 Budget changed one rule that matters to a growing small business: the compulsory VAT registration threshold. It also left several reliefs in place that a qualifying company has to elect or apply for. This post covers what changed, what stayed the same and what to do next.
The VAT registration threshold rises to R2.3 million
From 1 April 2026, you're only compulsorily required to register for VAT once your taxable supplies pass R2.3 million in any rolling 12-month period. The previous threshold of R1 million had stayed unchanged for years.
Under the old R1m threshold, a business had to register at a relatively small size. Once registered, it either added 15% to its prices or absorbed the VAT and took a lower margin. A business that sells to the public, such as a café, a salon or a retailer, competes with unregistered shops that charge no VAT. The higher threshold lets a growing business reach a larger turnover before it has to register.
Two things haven't changed. You can still register voluntarily from R120,000 of taxable supplies. That can make sense if you sell mainly to other VAT-registered businesses or you pay a lot of input VAT on stock and equipment. Once you're registered, VAT201 returns are still due every two months by the 25th, and every claim still needs a valid tax invoice behind it.
The threshold is measured on a rolling 12-month basis. Your financial year does not matter. If any consecutive 12 months goes over R2.3m, even a period that straddles two year-ends, you have 21 business days to register. Check your rolling total every month so that you register on time.
How the new threshold affects your business
- Under R2.3m and growing: you don't have to register yet. Run the numbers on voluntary registration, because it can still pay if most of your customers claim the VAT back.
- Already registered: nothing changes, and you stay registered. You can apply to deregister if you're now well below the threshold. Talk to us first, because SARS can claw back input VAT on assets you still hold.
- Approaching the threshold: prepare now. Set your pricing, your invoicing software and your input-VAT records up before you cross R2.3m.
Voluntary VAT registration worked example
Whether to register voluntarily depends on who your customers are and whether they can claim the VAT back.
An IT contractor billing R900,000 a year to VAT-registered companies
You bill R900,000 a year, entirely to VAT-registered companies. If you register voluntarily, you charge them R135,000 in output VAT. They claim all of it back, so your price to them stays the same in effect. You can now reclaim input VAT on your laptop, software subscriptions, phone and car running costs. Say that comes to R28,000 a year that you previously paid with no refund. You end up roughly R28,000 better off each year.
A coffee shop that sells to the public is in the opposite position. Its customers can't claim the VAT back, so registering adds 15% to its prices or takes 15% off its margin. The threshold is the same for both businesses, and the right decision differs. An accountant can run both sets of numbers for your business in a short call.
Small Business Corporation tax rates
Company tax stays at a flat 27%. If your company qualifies as a Small Business Corporation (broadly, turnover under R20m plus a few ownership and income tests), it pays a graduated rate on its profit that starts at 0%. For the 2026 tax year the SBC bands are 0% up to R95,750, then 7%, then 21%, then 27% only on profit above R550,000. SARS adjusts these bands each year, so check the current figures. A company only gets these rates if it qualifies and its return is completed on that basis.
A consultancy making R400,000 profit
At the flat 27% rate, tax on R400,000 is R108,000. As a qualifying SBC, the first R95,750 is taxed at 0%, the next slice at 7%, and only the portion above R365,000 at 21%. The total comes to roughly R26,200. That's about R81,800 less tax on the same profit for the same business.
Turnover tax for micro-businesses
If your business turns over R2.3 million or less, you can elect into turnover tax. The limit rose from R1 million in this Budget, for years of assessment starting on 1 March 2026 (individuals) or 1 April 2026 (companies), and the first R600,000 of turnover is now taxed at 0%. It replaces income tax and provisional tax with a single small percentage of turnover, on a 0/1/2/3% sliding scale, and it comes with less paperwork. It taxes turnover and ignores profit, so a low-margin business can end up paying more. For a micro-business with good margins, it can cut both the tax and the admin. Model your own figures before you decide.
Other rates in the 2026 Budget
Company tax is unchanged at 27%. Dividends tax stays at 20%, which applies when you take profit out of a Pty Ltd as a dividend. Provisional tax keeps the same two main deadlines, the end of August and the end of February. The 20% under-estimation penalty still applies if your second payment is based on an estimate that is too low. Treat every rate here as a 2026 figure, because SARS moves the brackets each year.
What to do next
If your turnover is well below R2.3m, the Budget changes little for you. A short conversation is useful if you're growing fast, close to a threshold, taking money out as dividends, or you've never checked whether your company qualifies for the SBC rates. We'll look at your own numbers and tell you whether anything in this Budget changes your plan. Book a discovery call to arrange it.