VAT Registration Threshold: What Small Businesses Need to Know

One of the most talked‑about proposals in the 2026/27 Budget is the plan to raise the compulsory VAT registration threshold from R1 million to R2.3 million in a 12‑month period. This is a big shift, especially for small businesses that have been hovering just above or below the current R1 million mark.

There’s also a proposed increase to the voluntary VAT registration threshold, moving from R50 000 to R120 000. This could change the way new or very small businesses think about whether VAT registration is worthwhile.

Both changes are intended to take effect from 1 April 2026, but it’s important to stress that these are still proposals. They are not yet written into law, so the existing R1 million threshold remains in place for now.

What This Could Mean for You

If your business turnover sits between R1 million and R2.3 million, this proposal could give you more breathing room. You may no longer be required to register for VAT once the law is enacted. And if you’re already registered but fall below the new threshold, you might have the option to deregister — though that decision should be made carefully, because VAT affects pricing, cash flow, and input‑VAT recovery.

For very small businesses, the higher voluntary threshold may limit early VAT registration, which could be helpful or restrictive depending on your business model.

Let’s Talk About Your Situation

If you think these proposed changes might affect your business — whether you’re close to the threshold, already registered, or unsure how this fits into your tax planning — please get in touch. Let’s have a chat and look at your numbers together so you’re ready when the legislation is finalised.