What higher tax allowances mean for your savings and retirement planning

On the latest episode of Everything Counts, host Motheo Khoaripe speaks with Vumi Dludlu, financial adviser at Investec, and Johan Loubser, Investec’s head of adviser enablement about what these updates mean in practice, and how investors can take advantage of them early in the tax year.

Why the start of the new tax year matters

Just as people use the start of a calendar year to set personal resolutions, the beginning of a tax year offers a similar opportunity for financial planning.

Each new tax year resets contribution limits, refreshes certain tax thresholds and renews annual exemptions. For investors, this creates a valuable chance to review savings habits, reassess financial goals, and put better strategies in place early rather than scrambling to optimise finances just before the tax year ends.

Starting early also allows investments more time to benefit from compounding, one of the most powerful drivers of long-term wealth creation.

Higher tax-free savings contribution limits

One of the headline announcements in the 2026 Budget Speech was the increase in the annual contribution limit for tax-free savings accounts.

The limit has risen from R36,000 to R46,000 per tax year, giving investors the opportunity to invest an additional R10,000 annually in a tax-efficient vehicle.

Broken down monthly, this equates to roughly R3,833 per month, compared to the previous R3,000. When viewed on a daily basis, it’s about R126 per day, making the target feel far more achievable for many savers.

However, investors should remember that unused allowances cannot be carried forward. If you contribute less than the annual limit in a given year, the unused portion is lost permanently.

Another critical factor is the lifetime contribution cap of R500,000, which remains unchanged. Contributions above this limit, or above the annual limit, are subject to a 40% penalty, making it essential for investors to track contributions carefully across all providers and accounts.

Increased retirement contribution deduction cap

Another major change introduced in the 2026 National Budget is the increase in the retirement fund deduction cap.

Investors are allowed to contribute up to 27.5% of the greater of their taxable income or remuneration to retirement vehicles such as retirement annuities, pension funds, or provident funds. Previously, the maximum tax-deductible contribution was capped at R350,000 per year.

That cap has now increased to R430,000 per year, providing an additional R80,000 of potential tax-deductible contributions for higher-income earners who were already reaching the previous ceiling.

This change creates a powerful incentive to boost retirement savings while benefiting from immediate tax relief. Depending on an individual’s tax bracket, contributions could effectively receive between 18% and 45% back in tax savings.

While contributions above the limit are not penalised – they are simply carried forward for future tax years – the increased cap reduces the need for any carryovers.

Ultimately, however, retirement contributions should be guided by long-term retirement goals rather than purely by tax incentives.

Other 2026 changes that affect investors

While tax-free savings and retirement contributions drew the most attention, several other adjustments from the 2026 National Budget may also influence how investors structure their portfolios.

Among them are:

• Personal income tax brackets and rebates, which were adjusted for inflation
• Capital gains tax annual exclusions, which increased from R40,000 to R50,000
• A proposed increase in the single discretionary allowance for offshore investing, rising from R1 million to R2 million

The discretionary allowance enables South Africans to convert Rands into foreign currency to invest abroad without requiring tax clearance for amounts within the limit.

If implemented, the increase would effectively double the amount investors can move offshore each year without additional administrative requirements.

Prioritising the right financial strategy

Despite the range of tax advantages available, tax efficiency should not overshadow a well-balanced investment strategy.

The first priority should always be ensuring that retirement savings are adequate. Maximising retirement contributions in a tax-efficient way can significantly strengthen long-term financial security.

Once retirement funding is on track, investors can then focus on building discretionary wealth and exploring diversification opportunities, including offshore investments.

Structured financial planning, ideally done with the guidance of a financial adviser, remains more important than selecting any single investment product.

What South Africans should review in the wake of the 2026 personal tax changes

With the new tax year already underway, now is an ideal time for investors to review several key aspects of their finances.

Review your contributions

For those contributing to tax-free savings accounts, it may be worth adjusting monthly debit orders to align with the new annual limit. For example, increasing monthly contributions from R3,000 to approximately R3,833 ensures the full allowance can be used by the end of the tax year.

Investors should also review retirement contributions to determine whether they are approaching the new R430,000 deductible ceiling, and whether increasing contributions makes sense within their broader financial plan.

Finally, it’s important to confirm total contributions across different platforms or providers to avoid accidentally exceeding limits.

Lumpsum vs monthly contributions

Some investors prefer to maximise their contributions early in the tax year with a lump sum, while others prefer consistent monthly investing. Both approaches have advantages.

A lump sum invested at the beginning of the tax year allows the funds to benefit from a full year of compounding. Monthly contributions, on the other hand, offer the benefit of rand-cost averaging, where investments are made at different market levels over time.

The best choice ultimately depends on individual financial circumstances, upcoming expenses and overall liquidity.