As a small business owner in South Africa, you have probably heard both “Turnover Tax” and “Small Business Corporation” thrown around as clever ways to pay SARS a little less. Both are real, both are legitimate, and both are built to make life easier for smaller players. The catch: they work in completely different ways, and picking the wrong one can quietly cost you.
And 2026 is the year to get this right, because Turnover Tax just had its biggest shake-up since it was introduced. Let’s break it down without putting you to sleep.
Quick heads-up: this is not the same choice for everyone
These two regimes do not apply to the same businesses in the same way.
- Turnover Tax is open to a wide net: sole proprietors, partnerships, close corporations, companies and co-operatives.
- The SBC regime is only for incorporated businesses, meaning registered companies and close corporations. If you trade as a sole proprietor, SBC is off the table unless you incorporate.
So if you are a one-person show, your real choice is usually normal income tax versus Turnover Tax. If you run a company or CC, you may qualify for either, and that is where the interesting decision lives.
Turnover Tax: simple, and it just got a lot roomier
Turnover Tax is a simplified system that taxes your turnover (your total sales) rather than your profit. No fiddly deductions, no complex expense schedules, just a percentage of what comes in. It also rolls several taxes into one, replacing income tax, provisional tax, capital gains tax and dividends tax. Staying in the VAT system is optional.
The 2026 Budget gave it a serious glow-up, effective 1 April 2026:
- The qualifying turnover limit jumped from R1 million to R2.3 million a year.
- The tax-free band almost doubled, from R335 000 to R600 000.
- The old restriction on your financial year-end was scrapped, opening the regime up to far more businesses.
Here is the current table for the 2027 tax year (1 March 2026 to 28 February 2027):
Taxable turnover | Tax |
R1 – R600 000 | 0% |
R600 001 – R950 000 | 1% of the amount above R600 000 |
R950 001 – R1 400 000 | R3 500 + 2% of the amount above R950 000 |
R1 400 001 and above | R12 500 + 3% of the amount above R1 400 000 |
Yes, you read that right: if your turnover is under R600 000, your Turnover Tax bill is zero.
Small Business Corporation (SBC): a reward for the profitable
The SBC regime is not a separate tax you register for. It is a set of reduced company tax rates that qualifying companies and CCs get instead of the flat 27% corporate rate. Crucially, SBC taxes your profit (taxable income after deductions), not your turnover.
To qualify as an SBC, your business generally has to tick these boxes:
- All shareholders or members are natural persons (real people, not other companies).
- Gross income is not more than R20 million for the year.
- It is not a personal-service company, and no more than 20% of income comes from investment income or personal services.
- It does not hold shares in most other companies.
Here are the SBC rates for years of assessment ending between 1 April 2026 and 31 March 2027:
Taxable income (profit) | Tax |
R0 – R99 000 | 0% |
R99 001 – R365 000 | 7% of the amount above R99 000 |
R365 001 – R550 000 | R18 620 + 21% of the amount above R365 000 |
R550 001 and above | R57 470 + 27% of the amount above R550 000 |
Notice that the first R99 000 of profit is tax-free, and everything up to R365 000 is taxed at a gentle 7%. For a profitable small company, that is a lot friendlier than a flat 27%.
The heart of the matter: turnover vs profit
This is the whole ballgame. Turnover Tax looks at what you make in sales. SBC looks at what you keep as profit. Which one is cheaper depends entirely on your margins.
The higher your profit margin, the more Turnover Tax tends to favour you. The thinner your margin, or in a loss-making year, the more painful Turnover Tax becomes, because you pay on sales even when there is little or no profit behind them.
So which should you choose?
A rough rule of thumb:
- Turnover Tax suits high-margin, low-expense businesses that value simplicity. Think consultants, small service outfits, and traders who do not carry heavy costs. Bonus points if you dread admin!
- SBC suits profitable companies with real running costs and deductions to claim, especially those reaching healthier profit levels where the graduated rates beat both Turnover Tax and the flat 27%.
But (and you knew there was a “but”) the rule of thumb is not the whole story. Turnover Tax simplicity can mean giving up deductions you might actually benefit from. SBC savings come attached to full accounting records and provisional tax obligations. And your VAT position, your growth plans and your customer base all feed into the decision too.
The bottom line
Turnover Tax and SBC are both brilliant tools when they fit, and expensive mismatches when they don’t. The 2026 changes have made Turnover Tax genuinely attractive to a much wider group of businesses, which is exactly why it is worth running your own numbers rather than copying what worked for the shop down the road.
Not sure which side of the line you fall on? Leading Edge can do the heavy lifting for you! We will look at your actual turnover, margins and structure and work out which regime keeps the most money in your pocket. Let’s have a chat and run the numbers together before the next filing season sneaks up on you.
Quick Quote Box
“Our approach: We don’t just tell you what tax is payable after the decision has been made.
We aim to be part of the decision before you make it, so you can make informed business decisions with the tax consequences in mind.”
– Monique Steyn
