SARS Raises VAT and Turnover Tax Thresholds for Small Businesses in South Africa

• SARS raised the compulsory VAT registration threshold from R1 million to R2.3 million, effective 1 April 2026
• Small businesses with a turnover below R2.3 million can now register for Turnover Tax, which replaces several other taxes
• SARS also adjusted the tax-free threshold under Turnover Tax to R600 000, giving qualifying small businesses significant relief

South Africa's tax authority introduced several key changes in 2026 that stand to make life considerably easier for small business owners across the country.

The South African Revenue Service raised its compulsory VAT registration threshold from R1 million to R2.3 million. The voluntary registration threshold also moved up, from R50 000 to R120 000. Both changes took effect on 1 April 2026, following an announcement by the Minister of Finance in the Budget Speech earlier this year.

Turnover tax now available to more small businesses

The Turnover Tax threshold was similarly increased to R2.3 million, with the tax-free threshold now sitting at R600 000. Businesses that qualify can register directly through the SARS Online Query System. The appeal of Turnover Tax is its simplicity: it replaces income tax, provisional tax, and capital gains tax for qualifying businesses, meaning owners pay a single tax instead of navigating multiple obligations.

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Turnover Tax is available to sole proprietors, partnerships, close corporations, companies and co-operatives. It is an elective system, so business owners can choose whether it suits their circumstances.

What else has changed for SMMEs

SARS also updated its guidance for small business corporations, which can access reduced corporate tax rates and additional incentives. For schools, new frequently asked questions were published in May 2026 to help institutions understand changes to the VAT Act following amendments that came into effect on 1 January 2026.

Employers were also given updated guidance on how to submit the EMP501 reconciliation when an employee's income tax number is unavailable.

Small business owners looking to stay informed can access the SARS SMME Connect newsletter, with Issue 14 published in April 2026, as well as a new podcast series called "The VAT Chat," which covers VAT legislation, rulings and practical guidance for businesses.

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Source: Briefly News