Today’s 2026 National
Budget Speech delivered by Finance Minister Enoch Godongwana brings excellent news for South Africa’s small and medium-sized enterprises (SMEs). The compulsory VAT registration threshold has been raised from R1 million to
R2.3 million.
This is the first adjustment to the threshold since 2009. For 17 years, inflation pushed many growing businesses over the old limit without a corresponding increase in real profitability. The new R2.3 million threshold finally catches up with the cost of doing business and delivers meaningful relief.
Straight from the Budget Speech
Minister Godongwana responded directly to feedback from ordinary business owners. Renette Oosthuizen, a small business owner from Gauteng, had asked for the threshold to be increased to R2 million because “the R1 million threshold has not kept pace with the cost of doing business.”
The Minister’s reply:
“Renette, you will be happy to know that in this budget the compulsory VAT registration threshold increases from R1 million to R2.3 million.”
What this means for your business
- If your taxable turnover is below R2.3 million in any 12-month period, you are not required to register for VAT.
- You avoid the administrative burden of monthly or bimonthly VAT returns, detailed tax invoices, and SARS audits.
- Better cash flow – no need to charge 15% VAT to customers and wait to claim input tax credits.
- More competitive pricing for customers who cannot reclaim VAT.
Voluntary registration remains available (generally for businesses with turnover above R120 000) if it benefits you – for example, to reclaim VAT on large capital purchases.
A positive step for South African business
This announcement, together with other small-business measures in the budget (including higher capital gains tax exemptions on the sale of qualifying small businesses), shows government listening to the SME sector – the engine room of job creation in our country.
At openHR, we celebrate every measure that makes it easier for South African employers to comply, grow and create jobs.
