Tax on Interest and Savings in South Africa: The R23,800 Exemption Explained (2026/2027)

1. The Short Answer

Interest you earn in South Africa is tax-free up to an annual limit. For 2026/2027 (1 March 2026 to 28 February 2027) the limit is:

• R23,800 if you are under 65
• R34,500 if you are 65 or older

Interest above the limit is added to your other income and taxed at your marginal rate. Budget 2026 left both limits unchanged; SARS lists the same amounts for every tax year from 2021/22 to 2026/27, so inflation has steadily shrunk them. Dividends work differently: they are taxed at a flat 20% before you receive them. Inside a tax-free savings account, neither is taxed at all.

2. The Interest Exemption

The exemption is per person, per tax year. It applies to interest from South African sources only, and it does not carry over: if you earn R10,000 of interest this year, the unused R13,800 is lost.

Each spouse has their own exemption. A couple under 65 can earn up to R47,600 of interest a year tax-free between them, if the savings are split between their names.

How much capital that covers

When interest rates rise, the same exemption covers less money. Someone who was safely under the limit two years ago may now owe tax on the same savings.

3. What Counts as Interest

• Interest on savings accounts, fixed deposits, notice deposits and money market accounts
• Interest distributions from unit trusts and money market funds (the distribution statement splits interest from dividends)
• Interest on retail savings bonds and other government bonds
• Interest you earn on a loan you made to someone else
• Interest SARS pays you on a late refund

These are not interest for this purpose: interest earned inside a tax-free savings account, inside a retirement annuity or pension fund, or inside a living annuity. The investment growth in those products is not taxed as you go. Foreign interest does not get the exemption; it is taxed in full.

4. Worked Examples

Example A: a fixed deposit, under 65

Nandi is 45, earns a salary in the 31% bracket and has R400,000 in a fixed deposit at 8%.

• Interest for the year: R32,000
• Less exemption: R32,000 − R23,800 = R8,200 taxable
• Tax: 31% × R8,200 = R2,542

Her after-tax return is 7.36% rather than 8%. If she had built up R110,000 in a tax-free savings account over earlier years instead, the remaining R290,000 would earn R23,200, inside the exemption, and she would pay no tax on any of her interest.

Example B: a retired couple

Pat and Sam are both 68 and have R900,000 in a money market fund at 7.5%, which earns R67,500 a year. If the fund is in Pat's name only, R33,000 is taxable above Pat's R34,500 exemption. Split equally, each earns R33,750, below the R34,500 limit, and neither pays tax on it. Moving savings between spouses is not a taxable donation; donations between spouses are exempt from donations tax.

5. Dividends and Unit Trusts

Dividends from South African companies are exempt from income tax, but dividends tax of 20% is withheld by the company or your platform before the money reaches you. There is no annual exemption for dividends. You do not declare local dividends to be taxed again; they appear on your tax certificate for information.

Foreign dividends are partly taxable on your return, at an effective rate of at most 20%.

A unit trust distribution can include both interest and dividends. The interest part uses up your R23,800 exemption; the dividend part has already had dividends tax withheld. When you sell unit trust units for more than you paid, the profit is a capital gain, with the first R50,000 of total net gains each year excluded. See our CGT calculator.

6. Tax-Free Savings Accounts

In a tax-free savings account (TFSA), interest, dividends and capital gains are all tax-free, permanently. The limits for 2026/2027:

• R46,000 a year, up from R36,000 in 2025/2026
• R500,000 over your lifetime, unchanged

Contributions above either limit are taxed at 40% of the excess. Withdrawals do not restore your limit: if you put in R46,000 and take out R20,000, you have still used R46,000 of the year's limit and R46,000 of your lifetime limit. Unused annual limit is lost; it does not carry over.

Our TFSA vs RA guide compares a TFSA with a retirement annuity, and the TFSA calculator projects growth within the limits.

7. Declaring Savings Income

Banks and investment platforms send SARS an IT3(b) certificate showing the interest they paid you, and SARS pre-fills it on your return. Check it against your own records, especially if you closed an account during the year or have accounts at several banks.

• If your interest is under the exemption and your only other income is one salary, you may not need to file at all for that year. SARS's 2026 rules exempt people whose only income is remuneration of R500,000 or less from one employer, with PAYE deducted, and no other income that needs declaring.
• Large interest income can make you a provisional taxpayer. Our provisional tax guide explains when.

8. Putting It Together

1. Emergency fund in an ordinary savings or money market account, ideally earning less than the R23,800 exemption.
2. Up to R46,000 a year in a TFSA for medium- and long-term savings you will not touch.
3. Split savings between spouses so both exemptions are used.
4. Retirement annuity for long-term savings where the upfront tax deduction is worth more than TFSA flexibility.
5. Above that, consider growth investments where the return is mostly capital gains (taxed only when you sell, at an effective maximum of 18%) rather than interest (taxed every year at up to 45%).

Frequently Asked Questions

Sources

Every figure on this page was checked against these official sources on 1 November 2026:

• SARS: Interest and dividends exemptions and rates
• SARS: Tax-free investments
• SARS: Rates of tax for individuals (2027 tax year)
• SARS: Donations tax