New tax-free limits: Rethink your investment mix

• South Africa’s annual tax-free savings contribution limit has increased from R36,000 to R46,000, giving investors more scope to put money to work tax-free each year.

• The R500,000 lifetime tax-free saving contribution limit hasn’t changed, so investors can now reach it sooner. That makes keeping track of contributions more important.

• The retirement fund tax deduction ceiling has also increased, from R350,000 to R430,000, subject to the applicable 27.5% limit.

• A TFSA, retirement fund and discretionary investment each do a different job. The new limits are a useful reason to check whether you have the right mix.

• Tax is only part of the picture. Access to your money, retirement needs and even what happens to your investments when you die should influence how you structure your portfolio.

A tax-free savings accounts (TFSA) is an investment account that allows your money to grow without attracting income tax, dividends tax or capital gains tax. You can invest up to a set amount each year and over your lifetime, making it a useful way to build-long-term wealth.

From 1 March 2026, South Africans can contribute R46,000 a year into a TFSA, up from R36,000. The lifetime contribution limit remains R500,000. The retirement fund tax deduction ceiling has also risen from R350,000 to R430,000, subject to the applicable 27.5% limit.

Episode one of Investec’s Mastering the Basics webinar series explores what the changes mean for investors and savers. At first glance, the higher TFSA allowance is a straightforward win: you can invest another R10,000 a year without paying tax on the growth. But making the most of it requires more than simply increasing your contribution. It is also an opportunity to review your broader financial plan and consider where your money can be put to best use.

“The real opportunity is to look beyond the higher limits and ask whether your investments are structured in the best way for your goals,” says Johan Loubser, Head of Financial Adviser Enablement at Investec.

How much difference can another R10,000 in a TFSA make?

More than the annual number might suggest.

While the TFSA annual contribution limit has increased by R10,000, the R500,000 lifetime limit hasn’t moved. Someone starting today and contributing the maximum could therefore reach that ceiling in roughly 11 years, compared with around 13 and a half to 14 years previously.

“The benefit of that ultimately is that you can get to that R500,000 mark quicker, and then leave that over a longer period to compound and grow,” says Loubser.

There is another benefit to putting money to work earlier. If you have the R46,000 available at the beginning of the tax year, it has the full year to remain invested. If a monthly debit order better suits your cash flow, regular investing can spread your entry into markets across different price levels.

There is no single best approach. What matters is choosing a contribution pattern that suits your cash flow and enables a sustainable longer-term plan.

And check that debit order. The new limit doesn’t mean your existing instruction will automatically increase.

What happens if I exceed my TFSA limit?

One of the biggest mistakes you can make when it comes to your TFSA is losing track of how much you have contributed.

The 40% tax on excess TFSA contributions makes the higher allowance a good reason to check your records, especially if you hold tax-free accounts with more than one provider.

You are allowed to have several TFSAs. You don’t, however, get a separate R46,000 allowance for each one.

“What’s important to understand is that your limit and your contributions are not per tax-free savings. It is collectively across all platforms and tax-free investments,” says Loubser.

The same applies to the R500,000 lifetime limit.

So before increasing a debit order or adding a lump sum, know how much you have already contributed elsewhere. The onus remains on the taxpayer to keep track.

How much can I now deduct for retirement contributions?

The rules allow you to deduct retirement fund contributions of up to 27.5% of your taxable income, subject to an annual ceiling of R430,000.

“Anyone who is not reaching that contribution limit, whether it is R430,000 or 27.5% of their taxable income, should consider increasing their contributions because it is such a tax-efficient way to invest for retirement,” explains Loubser.

Jill Anthony, Tax and Fiduciary Advisor at Investec, has a useful way of distinguishing between the two figures.

“Your R430,000 is essentially your cap or ceiling, while the 27.5% determines your calculated deduction.”

Someone earning R2 million a year, for example, would arrive at R550,000 when applying the 27.5% calculation. The R430,000 ceiling would therefore limit the available deduction, subject to the applicable rules. This makes the higher ceiling particularly relevant for higher-income earners.

There is also an important difference between exceeding the TFSA contribution limit and contributing more to a retirment fund.

An excess TFSA contribution attracts a tax penatly of 40%. An additional retirement fund contribution does not incur the same penalty and may still provide a tax benefit in future.

As Anthony puts it: “The benefit of an over-contribution is deferred, not lost.”

What if my income changes from year to year?

For individuals with variable incomes, retirement planning requires a little more flexibility. Income can fluctuate significantly from one tax year to the next, particularly for business owners, entrepreneurs or individuals whose remuneration includes variable components.

Anthony suggests starting with the longer-term objective: How much capital will you need for retirement, and what level of contributions will be required to get there? In lower-income years, contributions may need to be more modest. In stronger years, there may be scope to contribute more.

The carry-forward rules provide additional flexibility. Contributions that exceed the deductible amount in one tax year may be carried forward to future years, while the money continues to benefit from tax-free growth within the retirement fund. In stronger years, this can provide an opportunity to contribute more and help compensate for periods when contributions were lower.

“Essentially, I’m compensating for the years where my income may be lower,” Anthony says.

Should I choose a TFSA or RA, or both?

This is where the tax discussion becomes an investment discussion.

1.    A TFSA can be a useful long-term growth vehicle. Investment growth within it isn’t subject to income tax, dividends tax or capital gains tax, but your lifetime contributions are capped.

2.    A retirment fund brings different tax benefits and is designed around retirement. It also comes with rules around investment composition and accessing the money.

3.    Then there are discretionary investments. They don’t carry the same tax treatment, but they can give you greater flexibility and access to capital.

Anthony describes the choice as an “and solution”. Loubser reaches much the same conclusion from another direction: start by asking whether you are saving enough for retirement, then decide which combination of investments can meet that need.

There can even be a relationship between the two. Depending on your tax circumstances, the tax benefit arising from retirement contributions may create additional capacity to fund a TFSA.

The useful question, then, isn’t simply “TFSA or RA?”. It is what you need each rand to do for you.

What if most of my wealth is tied up in my business?

Business owners have another trap to watch. The experts warn against assuming the eventual sale of the business will take care of retirement.

“An over-reliance should not be placed on your business or the sale of your business as a retirement plan. The benefit of retirement planning is found in consistency and the compounding effect thereof. It’s a multi-decade approach,“ explains Anthony.

A business may be a significant asset. But retirement can be decades away and the eventual value, timing and circumstances of a sale are not fixed today.

Building retirement capital separately can reduce that dependence.

How does a TFSA get factored into my will?

The investment structure that works well while you are alive can behave very differently when you die.

A TFSA forms part of your deceased estate. Retirement fund benefits are dealt with under a different legal framework, including rules that affect dependants and nominated beneficiaries.

Larger balances therefore make questions about beneficiaries, estate liquidity and wills more relevant, not less.

Avoiding any sugarcoating, Anthony's says: “It’s expensive to die.”

Estate duty, capital gains tax implications, administration costs and other liabilities can create a need for liquidity. Investors with offshore assets may have another layer to consider, including the interaction between different jurisdictions and wills.

This is why the new contribution limits are about more than finding another R10,000 for your TFSA.

They provide a useful reason to pull the pieces together: what you are investing for, which investment holds the money, when you might need access to it and where it will eventually go.