2026 Budget Highlights for Employers: Personal tax brackets 2026/27, R4.95 travel rate, medical credits

The 2026/27 South African Budget brings good news for small and medium-sized enterprises (SMEs). SARS confirmed no major tax rate increases for individuals or businesses. This stability provides a predictable environment for financial planning.

However, specific adjustments to rebates and travel rates will directly impact your cash flow. These changes mean more disposable income for your employees and potential savings for your business. Understanding these nuances is vital for accurate payroll and provisional tax calculations.

PSS Group is here to help you navigate these updates with ease. We want to ensure your business remains compliant and efficient. Let us explore the key changes and what they mean for your bottom line.

Key 2026 Tax Changes and Their Impact

SARS is adjusting several key figures for the 2026/27 tax year. These updates will directly influence how much tax individuals pay. Businesses need to understand these changes for payroll and employee benefits.

Primary Rebate Increase

The primary rebate increases to R17 820 for the 2026/27 tax year. This rebate directly reduces an individual’s tax liability. What this means for your cash flow: A higher primary rebate translates to less Pay-As-You-Earn (PAYE) deducted from your employees’ salaries. This effectively puts more money into their pockets each month. For your business, this could enhance employee satisfaction and slightly reduce the administrative burden of higher tax deductions.

Medical Tax Credits Adjustment

Medical tax credits will rise to R376 per month for the first two beneficiaries. This credit helps offset medical aid contributions. What this means for your cash flow: Employees who contribute to medical aid will see a slightly larger reduction in their taxable income. This further boosts their net take-home pay. As an employer, ensuring your payroll system accurately reflects these new credit amounts is essential for compliance.

Reimbursive Travel Rate Update

The reimbursive travel rate increases to R4.95 per kilometre. This rate applies when an employee uses their private vehicle for business purposes. What this means for your cash flow: If your business reimburses employees for travel, this higher rate allows for more generous, tax-efficient reimbursements. It ensures your employees are fairly compensated for fuel and vehicle wear and tear. This is a deductible expense for your business, allowing you to claim more against your income.

Scenario Example

Consider an employee earning R30,000 per month in 2026/27. They are under 65 and have no dependents on medical aid. With the primary rebate of R17 820, their annual tax liability reduces significantly. If they are contributing to medical aid for themselves and one dependent, their monthly tax credit of R376 per person (R752 total) further reduces their PAYE. This means more take-home pay compared to previous years, directly impacting their personal finances positively.

Action Plan for Businesses

Proactive planning ensures your business benefits from these tax adjustments. Take these immediate steps to stay compliant and efficient.

• Review Payroll Systems: Update your payroll software to reflect the new primary rebate, medical tax credits, and reimbursive travel rate for the 2026/27 tax year. This ensures accurate PAYE deductions.
• Communicate with Employees: Inform your employees about these changes. Explain how the adjustments impact their take-home pay and travel reimbursements.
• Audit Travel Claims: Implement robust systems for tracking business travel. Ensure employees maintain logbooks or use digital tools to substantiate their claims for the R4.95/km rate.
• Adjust Provisional Tax: If your business makes provisional tax payments, review your estimated taxable income. Incorporate any changes in deductible travel reimbursements to ensure accurate payments.
• Consult a Tax Professional: Engage with a tax consultant to review your current tax strategies. PSS Group can help you identify further opportunities for optimisation.
• Maintain Thorough Records: Keep meticulous records of all payroll activities, travel claims, and medical aid contributions. This is crucial for SARS audits and compliance.

Frequently Asked Questions

When do these 2026/27 tax changes take effect?

These changes apply to the tax year beginning 1 March 2026 and ending 28 February 2027. Your payroll systems need updating before March 2026.

How do these changes affect my provisional tax payments?

As a business, you must factor in these updated rates when estimating your taxable income for provisional tax. Accurate estimates prevent penalties and overpayment.

Is a travel logbook still mandatory for claiming travel expenses?

Yes, a detailed travel logbook remains crucial. It substantiates all business travel claims. This applies especially if you use the increased R4.95 per kilometre rate.