SMEs To Benefit As VAT Threshold And Capital Gains Exemptions Increase In 2026 Budget

Simone Cooper | image supplied

In his Budget Speech, Finance Minister Enoch Godongwana announced that the VAT registration threshold will increase to R2.3m. The change follows commitments made during the State of the Nation Address earlier this month and is intended to ease compliance costs for smaller businesses.

The Budget also confirms that the capital gains tax exemption on the sale of a small business for older persons will rise from R1.8mto R2.7m, while the qualifying business value cap increases from R10m to R15m.

Simone Cooper, head of business and commercial banking at Standard Bank South Africa, says the VAT adjustment provides practical relief for growing firms.

“For many SMEs, compliance costs can be disproportionate to turnover. The increase in the VAT registration threshold to R2.3m is a welcome and practical measure,” she says.

Beyond SME-focused measures, the Budget reiterates the government’s intention to support regional trade and financial integration, including the implementation of the African Continental Free Trade Agreement. National Treasury plans to ease certain cross-border capital flow restrictions as part of efforts to improve competitiveness and position South Africa as a regional investment hub.

Six border post public-private partnership projects are among the initiatives cited to reduce congestion and improve trade flows. Logistics reforms targeting rail and port bottlenecks also form part of the broader infrastructure agenda.

The Budget outlines public-sector infrastructure spending expected to exceed R1tn over the medium term, including allocations to state-owned companies, provinces and municipalities, with transport and logistics receiving the largest share. Energy transmission and water infrastructure reforms are also prioritised to address structural constraints on growth.

Government debt is projected to stabilise for the first time in 17 years and begin declining over the medium term. Economic growth is forecast at 1.6% for 2026.

The measures combine short-term SME relief with longer-term structural reforms, with implementation now central to delivering their intended impact.