Three things changed for VAT on 1 April 2026. The compulsory registration threshold rose from R1 million to R2.3 million. The voluntary registration threshold rose from R50,000 to R120,000. And the Turnover Tax threshold rose to R2.3 million alongside them. The VAT rate itself did not change — it remains 15%.
These were announced by Finance Minister Enoch Godongwana in the Budget Speech on 25 February 2026 and took effect on 1 April 2026. They are the first adjustment to the VAT registration thresholds since 2009 — seventeen years during which inflation alone roughly halved the real value of R1 million.
This article covers what changed, who is affected, and the specific action each group needs to take. If you want the underlying rules rather than the change itself, read our guide to the VAT registration threshold in South Africa instead.
TL;DR
| Change | Was | Now | Effective |
|---|---|---|---|
| Compulsory VAT registration threshold | R1,000,000 | R2,300,000 | 1 April 2026 |
| Voluntary VAT registration threshold | R50,000 | R120,000 | 1 April 2026 |
| Turnover Tax annual turnover limit | R1,000,000 | R2,300,000 | 1 April 2026 |
| Turnover Tax 0% band | R0 – R335,000 | R0 – R600,000 | 1 April 2026 |
| VAT rate | 15% | 15% (unchanged) | — |
Nobody is deregistered automatically just because the threshold went up.
Deregistering has a real cost: exit VAT on assets and stock on hand.
If you were over the old R1 million threshold and never registered, the new threshold does not forgive that. SARS can still backdate.
What changed, precisely
1. Compulsory registration: R1 million to R2.3 million
From 1 April 2026, you are only obliged to register for VAT once the total value of your taxable supplies exceeds R2.3 million in any consecutive 12-month period.
This is the headline change and by far the most consequential. A business turning over R1.4 million in taxable supplies was, before 1 April, legally required to be a VAT vendor with everything that entails — VAT201 returns, tax invoice compliance, input VAT records, SARS verifications. That same business now sits comfortably outside the compulsory net.
2. Voluntary registration: R50,000 to R120,000
The floor for voluntary registration more than doubled, from R50,000 to R120,000 of taxable supplies in the preceding 12 months.
This cuts the other way. Very small businesses that used to be able to opt into VAT — often to look more established, or to claim input VAT on start-up costs — now need R120,000 of taxable supplies before they can apply.
3. Turnover Tax moved in parallel
The Turnover Tax regime for micro-businesses had its threshold raised to R2.3 million as well, with the 0% band extended from R335,000 to R600,000. The restriction on tax year-end dates was also removed.
The revised Turnover Tax rates for 2026/27:
| Taxable turnover | Rate |
|---|---|
| R0 – R600,000 | 0% |
| R600,001 – R950,000 | 1% of the amount above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% of the amount above R950,000 |
| R1,400,001 + | R12,500 + 3% of the amount above R1,400,000 |
A business turning over R600,000 now pays no Turnover Tax at all. Under the previous bands it would have paid tax on everything above R335,000.
4. What did not change
The VAT rate is still 15%. The 0.5 percentage point increase announced in the 2025 Budget was reversed before it took effect, and legislation confirmed the rate stays at 15% from 1 May 2025.
The rules themselves are unchanged. The 12-month rolling test, the written-contract forward-looking test, the 21-business-day application deadline, the definition of taxable supplies — all the same. Only the numbers moved.
Zero-rating, exemptions and denied input VAT are untouched.
Who is affected, and what you should do
There are four distinct groups, and the right action is different for each.
Group 1: Registered vendors with taxable supplies under R2.3 million
Roughly the largest affected group, and the one with a real decision to make.
You are still a registered VAT vendor. Nothing happened to you automatically on 1 April. Your VAT201s are still due, your tax invoices must still comply, and SARS still expects payment.
What you have gained is the option to deregister. Whether you should take it is not obvious:
Arguments for staying: your customers are mostly VAT vendors and do not care about your VAT (they claim it back); you have significant input VAT on stock, equipment or overheads; you are planning growth that will take you back over R2.3 million within a year or two; deregistering and re-registering is administratively painful.
Arguments for going: your customers are consumers or non-vendors, so your 15% is a genuine 15% price disadvantage; your input VAT is small; the compliance burden is disproportionate to the benefit.
The cost you must model before deciding: deregistration triggers exit VAT — you must account for output tax on enterprise assets and trading stock on hand at the date of cancellation, using the lesser of cost or open market value. For a business with meaningful stock or equipment, that can be a five- or six-figure liability.
SARS does allow the deregistration liability to be paid in six equal monthly instalments, which softens the blow.
We work through the full calculation in should you deregister for VAT now that the threshold is R2.3 million.
Group 2: Voluntarily registered vendors with taxable supplies under R120,000
You may receive a notice from SARS.
Where your taxable supplies in the preceding 12 months are below R120,000, SARS will notify you of its intention to cancel your registration. This is a notice, not an instant cancellation.
If you agree: SARS cancels your registration from a future tax period and tells you your final tax period and your obligation to submit a last VAT return.
If you disagree: you may object by completing an ADR1 Notice of Objection, giving written reasons, attaching a completed VAT101 registration application and all supporting documents, and emailing it to SARS within 80 business days of the date of the notice.
Either way, you keep charging VAT and submitting VAT201 returns until your registration is actually cancelled. SARS is explicit on this point. Stopping early creates a liability, not a saving.
Group 3: Growing businesses between R1 million and R2.3 million that were about to register
You have been given breathing room.
If you were tracking towards R1 million and preparing to register, you now have until R2.3 million. Use the time. The businesses that struggle most with VAT are the ones that register with disorganised books, no supplier invoice discipline and no system for separating standard-rated from zero-rated income.
Keep running the rolling 12-month test monthly. R2.3 million arrives faster than people expect once a business is growing at 30% a year.
Group 4: Businesses that exceeded R1 million before 1 April 2026 and never registered
The new threshold does not help you.
This is the group most likely to misunderstand the change. If your taxable supplies exceeded R1 million at some point before 1 April 2026, you became liable to register under the law as it then stood. Raising the threshold prospectively does not retrospectively erase that liability.
SARS addressed this directly in its Budget 2026 FAQs: where a person previously exceeded the R1 million compulsory threshold but failed to register, SARS may backdate the registration to the date liability arose, resulting in penalties and interest.
What that means in money:
Output VAT of 15/115ths on everything you sold in the backdated period. On R1.8 million of sales, roughly R234,780.
Input VAT claimable for the same period — but only where you hold valid tax invoices.
Interest at 10.25% per annum on late or underpaid tax (rate from 2 March 2026), plus late payment penalties.
SARS encourages affected businesses to approach the Voluntary Disclosure Unit. Applied for before SARS opens an audit, inquiry or investigation, the VDP gives 100% relief from understatement penalties where there was no intent to evade. Interest still applies. Once an audit notice is issued for the period, the VDP is no longer available.
If this is you, the window is now.
The transitional questions: what if you crossed a threshold near 1 April?
The change took effect on a date, not over a period, and that creates some genuinely awkward edge cases. Here is how each resolves.
You crossed R1 million in February 2026 and had not yet registered
You became liable in February, under the law as it stood in February. The 21-business-day application deadline started running then. The threshold increase on 1 April does not reach back and undo a liability that had already arisen.
In practice, whether SARS pursues a short period of non-registration that ended days before the threshold moved is a matter of judgement — but the legal position is that the liability arose. If the amounts are meaningful, take advice rather than assuming it evaporated.
You crossed R1 million in March 2026 and registered on time
You are a registered vendor. You did the right thing. From 1 April you are simply a vendor whose taxable supplies happen to be below the new compulsory threshold — which puts you squarely in Group 1 above, with the option to apply for cancellation.
Before you do, check the exit VAT on whatever you have bought recently. A business that just registered has often just claimed input VAT on new equipment, and that equipment will attract exit VAT on the way out.
Your rolling 12 months straddles 1 April
The test is applied at the point you assess it, against the threshold in force at that time. Assessing your position in July 2026 for the twelve months to 30 June 2026 means testing against R2.3 million, even though nine of those twelve months fell under the old regime.
You signed a large written contract in March 2026
The forward-looking test under section 23(1)(b) triggers liability where a written contractual agreement gives reasonable grounds to believe taxable supplies will exceed the threshold over the next twelve months. A contract signed in March worth R1.4 million triggered liability at R1 million. The same contract signed in April did not, because R1.4 million is below R2.3 million.
That is a genuinely arbitrary outcome, and it is worth checking if you signed anything substantial in the first quarter of 2026.
How the change affects tenders, banks and supplier databases
Deregistering has knock-on effects outside the tax system that businesses routinely forget to check.
Central Supplier Database and tender documentation. CSD registration captures your tax status. If you deregister, your VAT number falls away and your CSD record needs updating. Some tender specifications and corporate supplier onboarding forms still assume a VAT number, and while not having one is legitimate, it can create friction with procurement teams who do not understand the threshold change.
Corporate customers' vendor onboarding. Large customers sometimes have vendor-master systems that require a VAT number field to be populated. Check with your major customers before deregistering, not after.
Bank and finance applications. Credit teams sometimes use VAT201 history as an independent verification of declared turnover. Deregistering removes that data trail. If a finance application is on your horizon in the next twelve months, factor that in.
Pricing on published material. Menus, rate cards, websites and quotes that say "prices include VAT" or "excluding VAT" all need reviewing. Continuing to display "incl. VAT" after cancellation is misleading and, if you are still adding a line item called VAT to invoices after deregistration, unlawful.
Why the threshold was raised, and whether it will move again
The compulsory threshold sat at R1 million from 2009 to 2026. Over that period, inflation alone meant the real value of the threshold fell substantially — so each year, businesses that were no larger in real terms than the previous year's exempt cohort were pulled into the VAT system.
The effect was a slow, unlegislated expansion of the VAT base into the small business sector, with all the compliance cost that carries. Treasury's stated rationale for the 2026 increase was to correct that drift and reduce the compliance burden on smaller enterprises.
Whether the threshold is now indexed or will again be left to erode is not settled. Nothing in the Budget 2026 announcement commits Treasury to regular adjustment. It is reasonable to plan on the basis that R2.3 million will stand for several years and will slowly become less generous in real terms — which is another argument for not making a deregistration decision that only works at today's numbers.
One important caveat on status: SARS notes that the Budget 2026 threshold FAQs were issued based on the Minister's announcement of 25 February 2026 and remain subject to Parliament's legislative process. The thresholds are being applied, but the underlying legislation follows the ordinary parliamentary route.
The questions SARS answered directly
SARS published a Budget 2026 FAQ specifically on the threshold change. The most useful answers, in plain terms:
Will my voluntary VAT registration be cancelled automatically? No. Where taxable supplies in the preceding 12 months are below R120,000, SARS will notify you of its intention to cancel.
My taxable supplies are between R120,000 and R2.3 million. Will I be cancelled automatically? No. You may choose to cancel, but SARS will not do it for you.
Must I keep accounting for VAT while cancellation is in progress? Yes. You must continue to charge VAT on taxable supplies, and declare and pay or claim VAT by submitting VAT201 returns, until the final tax period advised by the Commissioner.
Can I be registered for both Turnover Tax and VAT? Yes. They are separate systems. Being on Turnover Tax does not prevent VAT registration, voluntary or compulsory.
How do I pay the VAT liability that arises on deregistration? In six equal monthly instalments. SARS notes a regulation may be issued to extend that period.
What this means strategically for a small business
Three practical observations from working through this with clients since April.
The threshold change is a pricing decision, not just a tax decision
For a business selling to consumers — a restaurant, a salon, a retailer, a gym — deregistering means you can either drop your prices by up to 13% and win on price, or keep prices where they are and take up to 13% more margin. That is a strategic choice worth modelling properly, not an administrative afterthought.
For a business selling to other VAT vendors, your VAT is invisible to your customer. They claim it back. Deregistering gains you nothing on price and loses you your input VAT claims.
Exit VAT makes timing matter
Because exit VAT is calculated on assets and stock on hand at cancellation, the liability is not fixed — it depends when you go. A retailer deregistering in January, with a warehouse full of stock, faces a far larger exit charge than the same retailer deregistering in February after the sales.
If you have decided to deregister, model the timing.
Do not deregister if you will be back over R2.3 million within 18 months
SARS makes this point too: before cancelling, assess the total value of taxable supplies likely to be made in the next 12 months. Deregistering and re-registering costs you exit VAT on the way out, a fresh registration application on the way in, and two sets of system changes. For a business growing quickly, staying registered is usually cheaper than a round trip.
Frequently asked questions
Did the VAT rate change in 2026? No. VAT remains at 15%. Only the registration thresholds changed. The 0.5 percentage point increase proposed in the 2025 Budget was reversed and never took effect.
When exactly did the new VAT threshold take effect? 1 April 2026. It was announced in the Budget Speech on 25 February 2026.
Why did the threshold increase by so much at once? Because it had not been adjusted since 2009. R1 million in 2009 is worth considerably less in real terms today, so the threshold had been quietly pulling smaller and smaller businesses into the VAT system every year through inflation alone.
Am I automatically deregistered if my turnover is under R2.3 million? No. You remain a registered vendor with all the obligations that carries until you apply for cancellation and SARS confirms your final tax period.
Does the higher threshold cancel my liability for not registering in 2024? No. Liability is determined under the law in force at the time. SARS can backdate a registration to when you first became liable, with penalties and interest.
Can I deregister and keep my VAT number in case I need it later? No. Cancellation ends the registration. Reactivating a VAT number later requires meeting the definition of an enterprise again and submitting a fresh application with supporting documents.
Is Turnover Tax now better than VAT for a small business? They answer different questions. Turnover Tax replaces income tax, VAT, provisional tax, CGT and dividends tax with a single tax on turnover for qualifying micro-businesses. VAT is a transaction tax you collect on behalf of SARS. Many businesses under R2.3 million will now find Turnover Tax attractive, but the exclusions are significant — professional services businesses earning more than 20% of receipts from professional services do not qualify, nor do personal service providers or labour brokers.
Working out which side of this you are on
The change is simple. Working out what to do about it requires knowing your exact taxable supplies over a rolling 12 months, your input VAT profile, the VAT status of your customer base, and the value of stock and assets that would attract exit VAT.
Smartbook models that calculation for clients as part of monthly accounting — and where deregistering is the right call, we handle the VAT123e application, the final return and the exit VAT declaration in fields 1A and 4A.
Book a free call to run the numbers →
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Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. SARS notes that the Budget 2026 threshold FAQs were issued based on the Minister's announcement of 25 February 2026 and remain subject to Parliament's legislative process. Verify current figures at sars.gov.za before acting.
Primary sources: SARS — Budget 2026 Frequently Asked Questions · SARS — Value-Added Tax · SARS — Cancellation of VAT registration