VAT Registration Thresholds in 2026: Should Your Small Business Register Before 2027?

What Changed with VAT Thresholds?

If you run a small business in South Africa, there's an important update from SARS that could affect your VAT planning for the next few years. From 1 April 2026, SARS increased the compulsory VAT registration threshold from R1 million to R2.3 million in taxable supplies over a 12-month period. At the same time, the voluntary VAT registration threshold rose from R50 000 to R120 000.

In plain terms: more small businesses now fall below the compulsory registration line, and more early-stage businesses qualify to register voluntarily if they choose to.

So the question many owners are asking is: does this change whether I should register for VAT, and should I do it before 2027?

Compulsory vs Voluntary Registration

Compulsory registration kicks in automatically once your taxable supplies exceed R2.3 million in any consecutive 12-month period, or you have reasonable grounds to expect you'll exceed that threshold. There's no choice involved at this point—you must register.

Voluntary registration is available once your taxable supplies exceed R120 000 in a 12-month period (increased from R50 000). If you're below that, voluntary registration generally isn't permitted, with limited exceptions for certain qualifying enterprises.

This means a wider band of small businesses—those turning over between R120 000 and R2.3 million—now have a genuine choice: stay unregistered, or opt in voluntarily.

Reasons to Consider Voluntary Registration

Even though the higher thresholds mean fewer businesses are forced into VAT, registering voluntarily can still make sense in certain situations:

You deal mainly with VAT-registered customers. If your clients are other VAT vendors, they can claim back the VAT you charge, so registering doesn't make you less competitive on price.
You have significant input VAT to claim. Businesses with large equipment purchases, rent, or supplier costs might benefit from claiming back VAT on expenses.
You want to look more established. Some larger clients and tenders require suppliers to be VAT registered before they'll do business with you.
You're growing fast. If you expect to cross the R2.3 million threshold within the next year or two, registering early can smooth the transition and avoid a scramble later.

Reasons to Hold Off

On the flip side, voluntary registration isn't automatically a good idea for everyone:

Your customers are mostly individuals or non-VAT-registered businesses. Adding 15% VAT to your prices could make you less competitive if competitors aren't registered.
Your admin capacity is limited. VAT registration brings bi-monthly (or monthly) returns, stricter record-keeping, and SARS compliance obligations.
Your margins are thin on inputs. If you don't have much input VAT to claim, registering mainly adds administrative burden without much benefit.

Should You Register Before 2027?

There's no universal answer—it depends on your customer base, growth trajectory, and the nature of your expenses. What's clear is that the new thresholds give small businesses more breathing room and more choice than before. Rather than registering reactively once you're forced to, this is a good moment to sit down with your numbers and make a deliberate decision.

A useful exercise: project your taxable supplies for the next 12–24 months. If you're trending toward R2.3 million, early voluntary registration may ease the transition. If you're well under R120 000, voluntary registration likely isn't available or necessary yet.

How One Practice Helps

One Practice keeps your bookkeeping organised and your taxable supply figures accurate and up to date, so you (or your tax practitioner) can make an informed registration decision with confidence. We prepare clean, SARS-ready figures for you to review and capture manually—giving you the clarity to decide what's right for your business, without the guesswork.

This article is general information only and does not constitute personalised tax or legal advice. VAT registration decisions depend on your specific circumstances. Please confirm your position with SARS, a registered tax practitioner, or another relevant authority before registering or making changes to your VAT status.