Small businesses received an important VAT change in 2026.

From 1 April 2026, the compulsory VAT registration threshold increased from R1 million to R2.3 million in taxable supplies over a 12-month period. The voluntary registration threshold also increased from R50,000 to R120,000.

For many smaller businesses, this represents a significant change.

What does the R2.3 million threshold mean?

A business generally has to register for VAT where the value of its taxable supplies exceeds, or is expected to exceed, R2.3 million in a consecutive 12-month period.

SARS states that where the threshold is exceeded or is reasonably expected to be exceeded, compulsory registration applies. An application must generally be made within 21 business days.

The change effectively gives smaller businesses more room to grow before being required to enter the VAT system.

What about voluntary registration?

Businesses below R2.3 million aren’t necessarily excluded from VAT.

The voluntary registration threshold is now R120,000, subject to the applicable requirements and exceptions.

That means a business should not automatically assume that remaining below R2.3 million means VAT registration is irrelevant.

Voluntary registration may still make commercial sense in particular circumstances — for example, depending on the nature of customers, input costs and the business’s position in the supply chain.

The threshold isn’t a target

One important warning: businesses should not treat R2.3 million as a target turnover figure simply because it is the registration threshold.

The correct question is:

• When does my business become legally required to register?

That requires monitoring taxable supplies on an ongoing basis.

What should small businesses do?

Businesses approaching the threshold should:

• monitor rolling 12-month taxable turnover;
• distinguish taxable supplies from exempt and other relevant transactions;
• consider contractual commitments that may cause the threshold to be exceeded;
• review whether voluntary registration is commercially beneficial;
• ensure accounting records can support the turnover calculation; and
• seek advice before the threshold is actually exceeded.

What about businesses already registered?

The increase in the compulsory threshold doesn’t simply mean that every existing VAT vendor below R2.3 million automatically stops being a VAT vendor.

SARS has indicated that vendors falling below the new threshold may apply to deregister, while SARS has also addressed circumstances where it may notify vendors of an intention to cancel registration.

Businesses should therefore assess their individual circumstances rather than simply assuming that the threshold increase automatically removes their VAT obligations.

A bigger opportunity for small businesses

The increase is particularly relevant in the context of South Africa’s broader effort to reduce compliance costs for smaller enterprises.

For businesses that previously faced VAT registration at R1 million, the new R2.3 million threshold provides additional breathing room.

But with that freedom comes an important responsibility:

• monitor your turnover.

The fact that the threshold is higher doesn’t remove the need for proper VAT planning.