Why RAs and Tax-Free Savings Accounts Are Your Best Move Now

The South African tax year ends on 28 February each year. For the 2026 tax year, this means you need to act before 28 February 2026 to make changes that affect your taxable income for the period ending then. With the deadline coming up quickly, lots of taxpayers are looking for proper ways to cut their tax while building up their savings for the long term.

These last few weeks give you a good - but short - chance to plan wisely. This time can make a real difference in whether you get the most from deductions and benefits or miss out on savings you can't claim later.

Important note:

Stick to proven, legal methods only and watch out for scams or wrong info. Here are two of the best and most recommended options for South African residents.

1. Retirement Annuities (RAs) - A Strong Way to Cut Your Tax

Retirement annuities are still one of the top tools for reducing what you pay in tax right now while planning for your future.

• Tax-deductible contributions: You can deduct RA contributions from your taxable income, up to 27.5% of your taxable income (or remuneration, whichever is higher), with a yearly cap of R350 000. This lowers the amount SARS taxes you on for the year.
• Practical example: A once-off contribution of R20 000 (say from a bonus or refund) reduces your taxable income by that full amount. Depending on your marginal tax rate (18% to 45%), this could mean a nice refund or lower tax when you submit your return.
• Bracket benefits: Bringing down your taxable income might move you into a lower tax bracket, which saves you more over time.
• Growth advantages: Money invested in the RA grows without income tax, dividends tax, or capital gains tax.
• Flexibility myth busted: Many people think RAs lock your money away forever, but that's not always true. Lots allow lump-sum top-ups, and from age 55 you can access funds (with some tax rules). They're also more flexible than most realise for changing contributions.
• Bonus tip: Use tax refunds or extra cash to add more - it's a smart way to grow your savings.

2. Tax-Free Savings Accounts (TFSAs) - Tax-Free Growth for Everyone

TFSAs work well alongside RAs, with the focus on tax-free returns from your investments rather than upfront deductions.

• No tax on earnings: Interest, dividends, and capital gains inside the account are all tax-free.
• Contribution limits: You can put in up to R36 000 per tax year and R500 000 over your lifetime (growth on top doesn't count towards the cap).
• Long-term potential: If you max out the annual amount over the years, you can build up serious tax-free growth - perfect for medium- to long-term goals.
• Greater accessibility: Unlike some retirement products, TFSAs let you get to the money more easily if you need it (for emergencies, paying off debt, or extra income in retirement), though taking money out reduces your lifetime cap.
• Best use: See them as a flexible extra savings tool next to your retirement plans.

Key Takeaway: Use Both for the Best Results

Putting retirement annuities and tax-free savings accounts together gives you a solid plan: instant tax relief from RAs plus tax-free growth from TFSAs over time. This combination can really bring down your lifetime tax and help secure your finances for retirement and beyond.

Act soon - contributions need to show up before the tax year closes (28 February 2026 for RA deductions and TFSA allowances). Speak to a qualified financial adviser or tax professional to fit these to your own situation, check your deduction room, and make sure everything follows current SARS rules (which can change).

This is general information only and not personalised advice. For the official details, go to the SARS website or talk to a registered adviser.