Part of Investing: guides on bringing capital into South Africa, investing your own money, and the rules that apply.
Tax-advantaged investing in South Africa comes down to three tools for most business owners: a tax-free savings account (TFSA), retirement fund contributions (usually through a retirement annuity, or RA), and knowing exactly how SARS taxes interest, dividends and capital gains everywhere else. The 2026 Budget raised several of the key limits from 1 March 2026, including the TFSA annual limit and the retirement deduction cap. The fourth name on many lists, the section 12J venture capital deduction, closed to new investors in 2021.
It is written for SME owners, sole proprietors and salaried professionals who want to know what each vehicle allows and how the rules change when money sits in a company.
This guide was last reviewed on 29 September 2026 and is general information, not legal, immigration, tax or investment advice.
What changed in 2026, and the legal status of the new figures
The 2026 Budget Review, chapter 4 (National Treasury) adjusted these thresholds for inflation:
| Threshold | Last changed | Before 1 March 2026 | From 1 March 2026 |
|---|---|---|---|
| Tax-free investments: annual limit | 2021 | R36,000 | R46,000 |
| Retirement fund contribution deduction cap | 2016 | R350,000 | R430,000 |
| CGT annual exclusion (individuals) | 2017 | R40,000 | R50,000 |
| Retirement interest de minimis for annuitisation | 2016 | R247,500 | R360,000 |
These amounts were written into the draft 2026 Rates and Monetary Amounts Bill published on 25 February 2026, which deems them to apply from 1 March 2026, and SARS already uses them on its rate pages. As at 29 September 2026 we could not confirm from Parliament’s records that the 2026 Rates Bill has been signed into law; the Rates Act gazetted on 1 April 2026 (Act 3 of 2026) carries the 2025 Budget’s figures.
One SARS page has not caught up: the SARS tax and retirement page still quotes the old R247,500 de minimis figure. Confirm the current figure with your fund before you retire.
Tax-free savings accounts: limits, penalties and who can hold one
A tax-free investment (the legal name for a TFSA, under section 12T of the Income Tax Act) is a designated savings or investment product where the returns are never taxed. SARS’s tax-free investments page sets out the rules:
- Annual limit: R46,000 per tax year from 1 March 2026 (it was R36,000 from 2021 to February 2026). The tax year runs from 1 March to the end of February. Unused allowance is forfeited, not carried forward.
- Lifetime limit: R500,000 per person, across all your TFSAs combined. The 2026 Budget did not change it.
- What is tax-free: SARS says amounts earned in these accounts are free from income tax, dividends tax and capital gains tax. Growth inside the account does not count towards either limit.
- The penalty: contributions above the annual or lifetime limit attract a 40% “penalty”, levied as normal tax on the excess. A R10,000 over-contribution costs R4,000.
- Withdrawals: you can withdraw, but anything you put back counts as a new contribution against both limits.
- Transfers: since 1 March 2018 you may move a TFSA directly from one provider to another. Ask for a transfer, not a withdrawal.
Individuals only: your company cannot open one
SARS’s guide Taxation in South Africa 2025 describes the exemption as applying to natural persons (and their deceased or insolvent estates). A company, close corporation or trust cannot hold a TFSA. Children can, and a parent may contribute on a child’s behalf, but those contributions use up the child’s own lifetime R500,000.
What a business owner should know
A TFSA is funded with money that has already been taxed, whether it reached you as salary, as a dividend or as sole proprietor profit. At R46,000 a year it is a personal wealth tool, not a home for business reserves. For where company cash can sit, see our guide to where South African business owners can invest surplus cash.
Retirement annuities and retirement fund deductions
Contributions to a pension fund, provident fund or retirement annuity fund are deductible under section 11F of the Income Tax Act. According to the SARS Budget 2026 frequently asked questions, contributions are deductible at 27.5% of the greater of remuneration or taxable income, subject to an annual cap of R430,000 (up from R350,000). The draft 2026 Rates Bill applies the new cap to years of assessment starting on or after 1 March 2026.
SARS’s Taxation in South Africa guide adds a third limit: the deduction cannot exceed your taxable income before the deduction and before any taxable capital gain. The cap covers all your funds together, and contributions you could not deduct are carried forward to the next year.
Salaried person, company director and sole proprietor
- Salaried employee: payroll contributions reduce PAYE monthly. Employer contributions are a taxable fringe benefit, but SARS deems them your own contribution, so they qualify for the deduction within the limits.
- Owner paid by their own company: the salary counts; dividends do not, because they are generally exempt from normal tax and so are not in taxable income.
- Sole proprietor: with no salary, the 27.5% is in practice measured against taxable income. The deduction is claimed on your return and factored into provisional tax (advance payments of income tax), not through a payslip.
The two-pot system in brief
The two-pot retirement system took effect on 1 September 2024. SARS’s note on two-pot tax directives explains the mechanics: one-third of contributions go to a savings component and two-thirds to a retirement component. Existing members received seed capital of 10% of their vested balance, capped at R30,000. You may withdraw from the savings component once per tax year, with a minimum of R2,000.
A savings withdrawal is taxed at your marginal rate (the rate on the top slice of your income), and cannot be cancelled once the fund has applied to SARS for a directive. In the 36% bracket, a R20,000 withdrawal loses R7,200 to tax.
The rules on retiring
- SARS’s lump sum directive guide says the retirement component is used to buy an annuity (a pension, including a living annuity), while any savings component balance can be taken in cash.
- For the part built up before 1 September 2024, SARS says you may generally take up to one-third of a pension, preservation or RA fund benefit as a lump sum, with the rest paid as an annuity. A retirement interest below the de minimis threshold may be taken in full as cash.
- Retirement lump sums are taxed on a separate table. For the 2027 tax year the SARS lump sum tables are unchanged: the first R550,000 is taxed at 0%, then 18%, 27% and 36% above R1,155,000.
Section 12J venture capital companies: closed since 2021
Section 12J let investors deduct the full cost of shares in a SARS-approved venture capital company (VCC), a company that pools investors’ money and invests it in qualifying small businesses. It is no longer available for new investment. The 2021 Budget Review stated that the sunset date “will not be extended beyond 30 June 2021”. SARS’s venture capital companies page confirms the 12-year sunset clause ended on that date.
Treasury’s reasons were blunt: its survey found only 37% of qualifying companies added new jobs after receiving VCC funding, and over half the investments appeared to be in low-risk rental, income-producing or guaranteed-return property structures.
We checked the tax chapters of the May 2025 and 2026 Budget Reviews, including the 2026 Annexure C: neither proposes reviving 12J. Treat any product sold in 2026 as offering a new 12J deduction as a red flag.
If you already hold 12J shares
- SARS says the deduction is not recouped (added back to income) if the VCC shares are held for longer than five years. Shares bought before 30 June 2021 pass that five-year mark by 30 June 2026 at the latest.
- Deductions were capped at R2.5 million per tax year for individuals and trusts, and R5 million for companies, from 21 July 2019.
- If SARS withdraws a VCC’s approval for non-compliance, 125% of the amounts investors contributed must be included in the VCC’s income, a cost the VCC and ultimately its shareholders bear.
- The deduction never removed investment risk. VCC shares are generally unlisted and hard to sell, and exit terms depend on each VCC’s own documents.
How investment income is taxed in 2026/27
Interest
SARS’s interest and dividends page gives an annual exemption on South African interest of R23,800 if you are under 65 and R34,500 if you are 65 or older. It applies only to individuals, and not to foreign interest. Interest above it is taxed at your marginal rate, from 18% to 45% on the SARS individual tax tables for 2026/27. Company interest gets no exemption.
Dividends
Dividends tax is 20%, a rate in force since 22 February 2017, withheld by the company or an intermediary before the dividend reaches you. SARS’s dividends tax exemptions FAQ lists South African resident companies, retirement funds and dividends on an individual’s tax-free investment among the exemptions, provided the paying company receives the required declaration before payment. Most foreign dividends received by individuals are taxed at a maximum effective rate of 20%.
Capital gains
SARS’s capital gains tax page gives an annual exclusion of R50,000 for individuals and special trusts from the 2027 tax year. SARS’s Taxation in South Africa guide sets the inclusion rates, the share of a net gain added to taxable income: 40% for individuals and 80% for companies and ordinary trusts.
| Taxpayer | Inclusion rate | Tax rate applied | Maximum effective CGT rate |
|---|---|---|---|
| Individual or special trust | 40% | Marginal rate, up to 45% | 18% |
| Company | 80% | 27% | 21.6% |
| Other trust | 80% | 45% | 36% |
Companies get no annual exclusion. Individuals aged 55 or older selling a small business worth up to R15 million may exclude R2.7 million of the gain.
Companies and small business corporations
The ordinary company rate is 27%. A small business corporation (SBC) pays tax on a sliding scale. SARS’s company and SBC rates page gives this table for years of assessment ending between 1 April 2026 and 31 March 2027:
| Taxable income | Tax |
|---|---|
| R1 to R99,000 | 0% |
| R99,001 to R365,000 | 7% of the amount above R99,000 |
| R365,001 to R550,000 | R18,620 plus 21% of the amount above R365,000 |
| R550,001 and above | R57,470 plus 27% of the amount above R550,000 |
To qualify, SARS says all shareholders must be natural persons throughout the year, gross income may not exceed R20 million, no shareholder may hold shares in other companies (with limited exceptions), and no more than 20% of receipts and capital gains may come from investment income and personal services combined. So a company building up large investment income can lose SBC status. SARS’s Interpretation Note 9 on small business corporations adds that even one day with a company as a shareholder disqualifies the entity for that year. See also our guide to the 2026 VAT and turnover tax threshold changes.
Comparison: the main tax-advantaged vehicles
| Vehicle | Who can use it | Limit | Tax benefit | Main catch | Official source |
|---|---|---|---|---|---|
| Tax-free savings account | Individuals only, including minors | R46,000 a year, R500,000 lifetime | No income tax, dividends tax or CGT on returns | 40% penalty on excess; re-deposits use up the limit | SARS |
| Retirement annuity and other retirement funds | Individuals (employees, directors, sole proprietors) | 27.5% of the higher of remuneration or taxable income, capped at R430,000 a year | Contributions deductible within the limits; unused deductions carried forward | Money locked in apart from savings pot; most must buy an annuity; withdrawals taxed | SARS |
| Section 12J VCC shares | Closed to new investment since 30 June 2021 | Was R2.5m a year (individuals), R5m (companies) | Was a 100% deduction; not recouped after five years | Closed; illiquid shares; real investment risk | SARS |
Investing personally or through your company: what the rules say
SARS treats a company and its shareholders as separate taxpayers. Money invested inside the company earns returns taxed at company rates: interest at 27% (or the SBC scale), and capital gains at an effective 21.6%, with none of the individual exemptions. Getting it out to you takes one of two main routes:
- Salary or director’s fees: taxed in your hands through PAYE at your marginal rate, and counted as remuneration for the retirement deduction. Whether and how much the company can deduct is a question for your tax practitioner.
- Dividends: paid out of profits that have already borne company tax, then subject to 20% dividends tax. For an ordinary company at 27%, R100 of profit becomes R73 after company tax, and R58.40 after dividends tax, an effective combined rate of 41.6%.
Dividends paid to a South African resident company are exempt from dividends tax and generally from normal tax, so profits can move up to a holding company without further tax, and dividends tax bites when a dividend reaches a non-exempt shareholder such as an individual. The trade-off: if a holding company owns your operating company, the operating company fails the SBC shareholder test and loses SBC rates. We do not recommend any structure; that call belongs with a registered tax practitioner who knows your numbers. For filing basics, see our beginner’s guide to tax filing in South Africa. If part of the plan is investing offshore, our guide to exchange control and offshore allowances covers the limits.
A worked illustration using 2026/27 figures
Illustration only. Thandi is 45, a sole proprietor, and her taxable income for the 2027 tax year (1 March 2026 to 28 February 2027) is R800,000 before any retirement deduction. She has no other deductions or credits in this example.
- Without an RA: R800,000 falls in the R695,801 to R887,000 bracket: R185,215 plus 39% of R104,200 (R40,638) is R225,853. Less the primary rebate of R17,820, her tax is R208,033.
- With a R150,000 RA contribution: her limit is the lesser of R430,000 and 27.5% of R800,000 (R220,000), so the full R150,000 is deductible. Taxable income drops to R650,000, in the R530,201 to R695,800 bracket: R125,599 plus 36% of R119,800 (R43,128) is R168,727. Less R17,820, her tax is R150,907.
- Saving: R208,033 minus R150,907 is R57,126, about 38% of the contribution. The money is locked in the fund and taxed later as a lump sum or annuity.
- Interest outside the TFSA: R30,000 of interest on a money market account. The first R23,800 is exempt; the remaining R6,200 is taxed at her 36% marginal rate, costing R2,232.
- A share sale: she makes a R140,000 net gain on shares held personally. After the R50,000 exclusion, 40% of R90,000 (R36,000) is added to taxable income. Her total of R692,200 (R650,000 plus R6,200 plus R36,000) is still in the 36% bracket, so the tax is R12,960. Had her company made the same gain, 80% of R140,000 (R112,000) at 27% would cost R30,240, before any dividends tax to get it out.
Common mistakes
- Exceeding R46,000 across TFSAs at two providers, or withdrawing and re-depositing. SARS adds up all accounts and the 40% penalty follows.
- Buying anything sold as a new “12J” deduction. The regime closed on 30 June 2021.
- Letting an SBC’s investment income creep above 20% of receipts, or adding a holding company, and losing SBC rates without noticing.
For live interest rates and bond yields to compare returns against, see our South Africa markets page, and for the rest of the series, the Investing hub.
Frequently asked questions
What is the TFSA limit for 2026/27?
From 1 March 2026 you may contribute R46,000 per tax year across all your tax-free savings accounts, up from R36,000. The lifetime limit stays at R500,000. Anything above either limit is taxed at 40%.
Can my company open a tax-free savings account?
No. SARS describes the section 12T exemption as applying to natural persons and their deceased or insolvent estates. A company, close corporation or trust cannot hold one.
How much can I claim for retirement annuity contributions in 2026/27?
You can deduct up to 27.5% of the higher of your remuneration or taxable income, capped at R430,000 a year, and never more than your taxable income before the deduction. Anything above the limit is carried forward.
Is section 12J still available in 2026?
No. Treasury confirmed in the 2021 Budget that the venture capital company incentive would not be extended beyond 30 June 2021, and the 2025 and 2026 Budget Reviews do not propose bringing it back.
How is a two-pot savings withdrawal taxed?
It is taxed at your marginal income tax rate, with no tax-free portion. You may withdraw once per tax year, the minimum is R2,000, and you must be registered for tax. Once your fund sends the directive request to SARS, you cannot cancel it.
What is the effective capital gains tax rate for individuals and companies?
For individuals, 40% of a net gain above the R50,000 annual exclusion is taxed at the marginal rate, giving a maximum effective rate of 18%. Companies include 80% of the gain at 27%, an effective 21.6%, with no annual exclusion.
