Tax Relief for Households as Revenue Surges but Excise and Fuel Levies Rise With Inflation

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Finance Minister Godongwa told Members of the NA in his budget speech that over the past three years, South Africa’s tax system has demonstrated resilience despite slow economic growth. This is why, for 2025/26, gross tax revenue is revised upwards by R21.3 billion compared to the estimate in the 2025 Budget.

Higher-than-expected net VAT, corporate income tax and dividends tax collections improved the in-year outlook. As a result, the government has decided to withdraw the R20 billion in tax increases provisionally included in the May 2025 Budget. The improving fiscal position allows the government enough room to withdraw the proposed tax increases, without putting fiscal sustainability or economic activity at risk. “We are also proposing additional tax measures to ease the financial burden on households and businesses, by adjusting personal income tax brackets and rebates fully in line with inflation,” the Minister said.

Mr Godongwana also noted that the national savings and investment rate is far below the levels needed to truly create generational wealth and support local investment in the economy. To encourage South Africans to save more, the government is proposing:

  • The tax-free annual investment limit be increased from R36 000 to R46 000 per year.
  • The limit to retirement fund deductions be raised from R350 000 to R430 000, allowing individuals to invest more each year on a tax-free basis.

However, increases to certain taxes are unavoidable, the Minister explained. For 2026/27, excise duties on tobacco will be increased in line with inflation. This includes excise duty on electronic nicotine and non-nicotine delivery systems. As a result:

  • The tax on a 20-pack of cigarettes rises from R22.81 to R23.58.
  • Pipe tobacco rises by 28 cents per 25 g, and cigarette tobacco by 87 cents per 50 g.
  • Cigars rise by R4.56 per 23 g.

The excise on alcoholic beverages also rises by inflation. As such:

  • A 340 ml can of beer or cider increases by 8 cents.
  • A 750 ml bottle of wine goes up by 15 cents.
  • A 750 ml bottle of spirits will increase by R3.20.

The rise in the fuel levy will also be in line with inflation. The general fuel levy will go up by 9 cents per litre for petrol and 8 cents per litre for diesel. The carbon fuel levy will go up by 5 cents per litre for petrol and 6 cents for diesel. The Road Accident Fund levy will increase by 7 cents per litre.