The VAT Registration Threshold Is Now R2.3 Million: What It Means for Your Business

Key takeaways

• From 1 April 2026, the compulsory VAT registration threshold rose from R1 million to R2.3 million, its first change since 2009.
• The voluntary registration threshold increased from R50,000 to R120,000.
• VAT stays at 15%; the previously proposed increase was withdrawn.

If you’re now below R2.3m, deregistering can trigger a once-off “exit VAT” charge on your stock and assets, sometimes worth it, often not.

Some tax changes are technical footnotes. This one is not. For the first time since 2009, the VAT registration threshold in South Africa has moved, and it has moved a long way. If your turnover sits anywhere near the old R1 million line, this affects you directly, and the smartest response isn’t always the obvious one.

What is the VAT registration threshold in South Africa for 2026?

From 1 April 2026, a business must register for VAT once its taxable supplies exceed R2.3 million over any 12-month period, up from R1 million. The voluntary registration threshold rose from R50,000 to R120,000, and the VAT rate remains 15%. The change was announced in Budget 2026 by National Treasury.

Why does it matter so much? The R1 million threshold had stood still for over a decade while prices climbed. Inflation alone was quietly dragging genuinely small businesses into full VAT compliance. Lifting the line to R2.3 million reverses years of that drift in one step.

Should I deregister for VAT now that I’m under R2.3 million?

Not automatically. Deregistering can trigger a once-off output (“exit”) VAT charge on your business assets and trading stock, because SARS treats deregistration as if you sold those assets back to yourself. If you hold significant stock, equipment or vehicles, that one-off bill can be substantial and lands immediately as a cash-flow event.

In other words: deregistering can save you a little ongoing admin and cost you a large once-off charge. Sometimes it’s still the right move. Often it isn’t.

How do I decide whether to stay VAT-registered?

There’s no universal answer. It depends on the shape of your business:

• Who your customers are. If most clients are VAT-registered businesses, they simply reclaim the VAT you charge, so staying registered is largely neutral for them and lets you claim your own input VAT.
• Your input VAT. If you buy a lot of stock, equipment or services with VAT on them, registration lets you claim that back; deregistering forfeits it.
• The assets on your books. The more you hold, the bigger the potential exit-VAT charge on deregistration.
• Your growth trajectory. If you’ll cross R2.3m again soon, deregistering only to re-register shortly after is pure friction, and it can affect your cash flow planning.

What about new and smaller businesses?

The higher voluntary threshold (R120,000) gives startups more room before taking on VAT, but voluntary registration can still make sense, for example, to claim input VAT on early setup costs, or when dealing with larger clients who expect a VAT number. It’s a deliberate decision, not a default.

The practical takeaway

Don’t deregister on instinct. Run the numbers first: the once-off exit-VAT cost versus the ongoing saving, weighed against your customer base and growth plans. This is a genuine strategy decision, and one worth getting right the first time. You can read more on the official rules at SARS VAT.

Frequently asked questions

What is the VAT registration threshold in South Africa in 2026?

From 1 April 2026 you must register for VAT once taxable supplies exceed R2.3 million in any 12-month period. The voluntary registration threshold is R120,000.

Is the VAT rate changing in 2026?

No. VAT remains 15%. The increase proposed in an earlier budget was withdrawn.

Can I deregister from VAT if I’m now under R2.3 million?

You may be able to, but deregistration can trigger a once-off output (exit) VAT charge on your assets and stock. Weigh that cost against the saving first.

Should I register for VAT voluntarily?

It can suit businesses with mostly VAT-registered clients or significant input VAT to claim, but it adds compliance obligations. It’s a case-by-case decision.

Make the smart call, not the quick one…

Whether to register, stay registered or deregister is exactly where good advice pays for itself. At Zen Accountants in Pretoria, we model the real impact for your business (the exit-VAT exposure, the input VAT at stake, and the effect on your customers), so you act on numbers, not guesswork.

Request a free VAT review and we’ll tell you, plainly, what makes sense for you.

About the author: Zen Accountants is a Pretoria-based accounting, tax and payroll practice serving SMEs across South Africa. This article is general information, not personalised tax advice. Figures reflect Budget 2026; confirm current rules at sars.gov.za.