The 2025/26 Tax Guide for South African Landlords: What You Must Know

The 2025/26 Tax Guide for South African Landlords: What You Must Know is essential reading for property owners who rent out residential or commercial spaces.

With changing tax regulations and stricter enforcement by SARS, landlords must understand how to declare rental income, identify eligible expenses for deduction, and ensure compliance with the relevant tax laws. Proper planning can save money, prevent penalties, and ensure landlords protect their investments.

Rental Income and SARS Requirements

All rental income must be declared to SARS in the 2025/26 tax year. This includes rent received from tenants, additional payments such as parking fees, and income from furnished properties. Even if payments are made in cash, SARS expects landlords to declare them.

The 2025/26 Tax Guide for South African Landlords: What You Must Know highlights that undeclared rental income can trigger audits, penalties, and even criminal charges in severe cases.

Declaring Rental Income

SARS requires landlords to declare rental income on the ITR12 tax return. Those who earn above the tax threshold are required to submit annual returns.

Provisional taxpayers are required to submit two returns during the year, in addition to a final return, which is due at the end of the year. Failing to declare rental income is a significant mistake and one of the first areas SARS checks during compliance reviews.

Deductible Expenses

One of the benefits for landlords is the ability to deduct legitimate expenses from rental income. These include municipal rates, bond interest, repairs, insurance, and property management fees. The key is to distinguish between repairs and improvements.

Repairs restore the property to its original condition and are deductible. Improvements increase the property’s value and cannot be claimed against income, though they may reduce capital gains tax later.

The 2025/26 Tax Guide for South African Landlords: What You Must Know stresses the importance of keeping receipts and invoices as proof of all deductions.

Capital Gains Tax Considerations

When selling a property, landlords must calculate capital gains tax. The first R2 million profit on a primary residence is excluded, but rental and investment properties do not qualify for this exemption.

For individuals, forty per cent of the capital gain is included in taxable income and taxed at the applicable marginal rate. Proper planning can help reduce this burden. Timing sales carefully or offsetting with legitimate capital costs can make a substantial difference.

Depreciation and Wear and Tear

SARS allows landlords to claim wear and tear on certain items such as furniture, appliances, and security systems. These claims must follow official SARS schedules.

Overstating depreciation is a risky practice that can lead to penalties if challenged. The 2025/26 Tax Guide for South African Landlords: What You Must Know recommends accurate records and professional advice when claiming depreciation.

VAT on Rental Income

Residential rental income is exempt from VAT, but commercial property rentals may be subject to VAT if annual turnover exceeds one million rand. In such cases, landlords are required to register for VAT, charge VAT on rental income, and claim input VAT on allowable expenses. Failure to register for VAT when needed is a common compliance risk.

Record Keeping

Landlords are required to keep records for at least five years. These include lease agreements, receipts, municipal accounts, and bank statements.

Without proper documentation, SARS may reject deductions or raise additional assessments. Good record keeping also helps landlords track profitability and manage their portfolios more effectively.

Provisional Tax Obligations

Many landlords are provisional taxpayers because of the size of their rental income. This requires two tax payments during the tax year plus a final reconciliation.

Accurately estimating taxable income is crucial, as underpayment can result in penalties and interest. The 2025/26 Tax Guide for South African Landlords: What You Must Know advises landlords to review income regularly and update estimates when needed.

Key Updates for the 2025/26 Tax Year

SARS has introduced stricter reporting requirements for mixed-use properties where both residential and commercial income is earned. Digital document uploads through eFiling are now more widely required, and SARS has placed a strong focus on undeclared short-term rental income, such as that from Airbnb. Landlords should expect more targeted audits in these areas.

Common Mistakes to Avoid

Common errors include failing to declare cash rental income, treating capital improvements as repairs, overstating bond repayments by including capital amounts, and ignoring VAT on commercial rentals. Another frequent problem is landlords not declaring short-term rental income from platforms. Avoiding these mistakes is essential for compliance.

Practical Tips for Landlords

Landlords should consider using a separate bank account for rental income and expenses to simplify tax management. Property management software can help track payments and invoices.

Digital copies of receipts and lease agreements should be stored for easy access during audits and other review processes. Consulting a qualified tax practitioner is highly recommended for landlords with multiple properties or complex arrangements.

FAQs

Do I pay tax if I only rent out one flat?

Yes, all rental income must be declared, regardless of the amount.

Can I deduct renovations?

No, renovations are capital costs. Only repairs that restore the property can be deducted.

How does SARS know about my rental income?

SARS receives information from banks, municipalities, and rental platforms. Undeclared income can easily be detected.

Is Airbnb income taxed differently?

No, all rental income, whether long-term or short-term, must be declared.

What happens if my rental expenses are higher than my income?

A rental loss can be set off against other taxable income, but SARS may investigate consistent losses as potential tax avoidance.

Conclusion

The 2025/26 Tax Guide for South African Landlords: What You Need to Know highlights that rental income presents both opportunities and responsibilities. With SARS strengthening enforcement and introducing new reporting standards, landlords must be more diligent than ever.

By declaring income correctly, claiming legitimate deductions, and keeping accurate records, landlords can remain compliant while protecting their financial interests. Careful planning and professional advice will ensure the 2025/26 tax year is managed successfully.

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Useful External Links

SARS – https://www.sars.gov.za

National Treasury – https://www.treasury.gov.za

South African Reserve Bank – https://www.resbank.co.za