Finance Minister Enoch Godongwana has announced increases to so-called “sin” taxes and fuel levies, while introducing inflation-linked relief for personal income taxpayers in the 2026 National Budget.
Income Tax Relief To Prevent Bracket Creep
Presenting the Budget in Parliament, Godongwana confirmed that personal income tax brackets and rebates will be fully adjusted in line with inflation. The move is aimed at preventing bracket creep, where taxpayers move into higher tax brackets due to inflationary salary increases rather than real income growth.
In the lead-up to the Budget, economists had warned that failure to adjust tax brackets would erode disposable income, leaving consumers effectively worse off despite nominal pay increases. National Treasury said the full inflation adjustment is intended to protect household incomes at a time when many South Africans remain under financial pressure.
Government has also proposed enhancements to tax-advantaged savings incentives. The annual contribution limit for tax-free investments will increase from R36,000 to R46,000. The maximum deductible contribution to retirement funds will rise from R350,000 to R430,000.
Sin Taxes Rise Despite Improved Revenue Outlook
Despite improved revenue projections, government confirmed that increases to excise duties on tobacco and alcohol are unavoidable.
From 2026/27, tobacco taxes will rise in line with inflation. The duty on a pack of 20 cigarettes will increase from R22.81 to R23.58. Pipe tobacco will go up by 28 cents per 25 grams, cigarette tobacco by 87 cents per 50 grams, and cigars by R4.56 per 23 grams. Taxes on electronic nicotine and non-nicotine delivery systems will also increase.
Excise duties on alcoholic beverages will similarly rise by inflation. A 340ml can of beer or cider will cost 8 cents more in tax, a 750ml bottle of wine will increase by 15 cents, and a 750ml bottle of spirits will see a R3.20 hike.
With inflation currently at 3.5%, industry players had cautioned that larger increases could significantly push up retail prices. Prior to the Budget, Diageo warned that a 6% increase, in line with previous years, could drive the tax on a bottle of spirits above R100.
Fuel Levies Also Increased
Motorists will also feel the impact of higher fuel-related taxes. The general fuel levy will increase by 9 cents per litre for petrol and 8 cents per litre for diesel. The carbon fuel levy will rise by 5 cents per litre for petrol and 6 cents for diesel, while the Road Accident Fund levy will increase by 7 cents per litre.
The combined adjustments are expected to add further pressure to transport and goods costs, which often filter through to consumers.
Relief For Small Businesses And Older Entrepreneurs
Alongside the tax increases, the minister announced measures aimed at supporting small businesses.
The turnover tax registration threshold for small businesses will be raised to R2.3 million, exceeding a request from a Gauteng-based small business owner who had called for the limit to be lifted to R2 million.
In addition, the capital gains tax exemption for the sale of small businesses by individuals aged 55 and older will increase from R1.8 million to R2.7 million. The qualifying business value threshold will also rise from R10 million to R15 million, enabling more small business owners to benefit from tax relief when selling their enterprises.
National Treasury said public participation played a role in shaping parts of the Budget, with more than 1,200 submissions received through its annual “Tips for the Budget” initiative.
While consumers will face higher costs on alcohol, tobacco and fuel, government maintains that the inflation-linked tax relief and expanded savings incentives will help cushion households and businesses in the year ahead.
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