Turnover tax in 2026: is the simplified regime right for you?

Budget 2026 expanded the turnover-tax regime for qualifying microbusinesses. From 1 April 2026, the annual qualifying-turnover limit increased from R1 million to R2 300 000, and the current table applies a 0% rate to the first R600 000 of taxable turnover.

That makes the regime relevant to more sole proprietors, partnerships, close corporations, companies and co-operatives. It does not mean every business below R2 300 000 should register.

The current turnover-tax table

• Up to R600 000: 0%.
• R600 001 to R950 000: 1% of taxable turnover above R600 000.
• R950 001 to R1 400 000: R3 500 plus 2% above R950 000.
• R1 400 001 to R2 300 000: R12 500 plus 3% above R1 400 000.

The table applies to qualifying microbusinesses for the relevant current year of assessment. Confirm the applicable year and effective registration date before using it in a forecast.

Why the lower rates can be misleading

Normal income tax is generally based on taxable profit after allowable deductions. Turnover tax is based mainly on taxable turnover. A business with strong margins may benefit from the simpler system, while a low-margin business with high stock, staff or delivery costs can pay tax even when very little profit remains.

Compare both systems using realistic annual sales, gross margin, operating costs, asset disposals and distributions. Do not compare only the top percentages.

Qualification still matters

The turnover limit is not the only test. The entity type, owners, investment income, professional-service income, shares held in other companies and the nature of receipts can affect eligibility.

VAT also needs a separate decision. A qualifying turnover-tax business may elect to remain VAT registered, and a business that meets the applicable VAT rules must deal with those obligations correctly. Do not treat turnover tax as an automatic cancellation of every other registration.

Administration is simpler, not absent

Registered microbusinesses still need reliable records of amounts received, assets, liabilities and distributions. Interim payments and the annual turnover-tax return must also be managed. Weak sales records can make a turnover-based tax especially difficult to defend.

What to compare before registering

• Expected taxable turnover for the full year.
• Gross margin and the costs that would have been deductible under normal tax.
• Whether the business passes every qualifying test.
• VAT status and customer expectations about tax invoices.
• Planned asset sales, dividends or ownership changes.
• The timing and process for entering or leaving the regime.

What this means for your business

The R2 300 000 limit creates a wider option, not a universal saving. Run the normal-tax and turnover-tax outcomes side by side, confirm eligibility and document the decision before applying.