June 2026 Tariff Amendments: Key Impacts for SA Businesses
17/06/2026SARS Filing Season: Essential First Steps for Businesses
22/06/2026SARS Releases Updated 2025/26 Income Tax Guides: What Businesses and Individuals Need to Know
The South African Revenue Service (SARS) recently published updated versions of two critical income tax guides: the Guide on the Determination of Medical Tax Credits (Issue 18) and the Guide on Income Tax and the Individual (2025/26). While these documents are primarily focused on individual taxpayers, they carry significant weight for business owners, directors, and employers who must navigate the complexities of payroll management and personal financial planning.
Staying abreast of these updates is essential for ensuring that your business remains compliant with the latest tax interpretations and that your employees are taxed accurately. With the 2025/26 filing season in full swing, understanding these changes is no longer optional—it is a prerequisite for sound financial management.
Why This Matters to Businesses
For many business owners, the line between personal and business tax often blurs, particularly in SMEs where directors are also the primary earners. These guides provide the framework for how personal income is treated, which directly impacts the take-home pay of directors and the tax efficiency of their remuneration packages.
Furthermore, as an employer, your payroll department (or service provider) must apply the correct medical tax credits and tax brackets to avoid reconciliation errors at the end of the tax year. Failure to implement the updated rates can lead to administrative headaches during the EMP501 reconciliation process and may result in employees facing unexpected tax liabilities when they file their individual returns.
Key Business Implications
The updated guides highlight several critical areas that require immediate attention from business leaders and payroll administrators:
- Updated Medical Tax Credits: For the 2025/26 tax year (1 March 2025 to 28 February 2026), the monthly credits have been adjusted. The main member and the first dependant each receive R364 per month, while each additional dependant receives R246 per month. For a family of four, this equates to a monthly tax reduction of R1,220.
- Future Rate Increases: SARS has already signaled that for the 2026/27 tax year, these rates will increase to R376 for the main member/first dependant and R254 for additional dependants. Businesses planning their budgets for the next cycle should take these inflationary adjustments into account.
- The Impact of “Fiscal Drag”: A significant point for employers to note is that personal income tax brackets have not been adjusted for inflation since the 2023/24 year. This means that if you have given your employees salary increases to keep up with the cost of living, they may find themselves pushed into higher tax brackets. This “bracket creep” can diminish the perceived value of a raise, as a larger portion of the increase is consumed by tax.
- Clarification on Medical Products: The guides reiterate the strict distinction between registered medical scheme contributions and medical insurance products. Only contributions to registered schemes qualify for the Section 6A tax credit, a distinction that often confuses employees and requires clear communication from the employer.
