If you're a South African parent with children in private school, the SARS tax changes South Africa introduced in 2026 deserve your attention. From January 2027, independent schools will begin making payments linked to new VAT deregistration rules — and while the changes target the schools themselves, the ripple effects could reach family budgets across the country.
We often work with families who carefully plan their finances around school fees, extramurals, uniforms, and the dozens of other costs that come with raising children. Education is one of the biggest line items in many South African household budgets, and anything that shifts the financial landscape for schools has the potential to shift it for parents too.
Understanding the SARS tax changes South Africa rolled out for private schools
The changes stem from amendments to the Value-Added Tax Act that were proposed in 2025 and formally promulgated in April 2026. In plain terms: schools registered under the South African Schools Act must now deregister as VAT vendors, with effect from 1 January 2026.
Previously, some private schools qualified for VAT registration because they earned taxable income from activities outside their core educational services — things like renting out sports facilities to external clubs, running tuckshops open to the public, or providing boarding accommodation. Where the value of those taxable activities exceeded the VAT registration threshold of R1 million, schools could register as VAT vendors and claim input VAT deductions on a portion of their expenses.
That arrangement has now been closed. Educational services provided by these schools are exempt from VAT going forward, except where a school conducts qualifying welfare activities. Schools must therefore correct any VAT returns submitted for periods from 1 January 2026 onward where necessary.
Why the timing caught some schools off guard
While the law took effect at the start of 2026, many schools only became fully aware of the requirement to deregister once the legislation was formally published in April. SARS has since confirmed that schools must apply to cancel their VAT registration using the VAT123e form — it doesn't happen automatically.
The catch? Deregistration triggers something called exit VAT, and schools have until 1 January 2027 to prepare for it.
What exit VAT means and how schools must calculate it
Exit VAT is a payment schools must make when they leave the VAT system. It's calculated at the VAT fraction of 15/115 on the lower of the cost or open-market value of assets that formed part of the school's VAT enterprise at 31 December 2025 — and on which input VAT was previously claimed.
This could include furniture, IT equipment, consumables such as stationery and cleaning products, sports gear, and more. For a large school with significant capital assets on the books, the amount can be substantial.
Because schools often have a mixture of exempt and taxable activities, the calculation can get complicated. The appropriate apportionment rules must be applied, and schools are encouraged to work with tax practitioners or accountants to ensure they get it right.
Payment relief: spreading the cost over 12 months
SARS and National Treasury have provided some breathing room. Schools will only become liable for exit VAT from 1 January 2027, and they can pay the amount in twelve equal monthly instalments throughout the year. Schools that need longer than 12 months can request payment arrangements from SARS.
That instalment option is a lifeline for schools facing cash-flow pressure, but it doesn't eliminate the liability — it simply spreads it out.
How the SARS tax changes South Africa announced could affect school fees
This is the question on every parent's mind. Schools facing an unexpected tax bill — even one spread over a year — may look for ways to recover those costs. That could mean higher fees, reduced spending on facilities or teaching staff, delayed infrastructure projects, or a combination of all three.
Representative bodies for independent schools have raised concerns that the changes add financial pressure at a time when many schools are already navigating tight budgets, rising operational costs, and post-pandemic enrolment uncertainty. Some schools have operated on thin margins for years, and an exit VAT liability could tip the balance.
National Treasury has said the intention behind the amendment was always to assist schools, not burden them — and that Treasury and SARS remain committed to ongoing engagement with school associations throughout 2026 to help manage the transition and address practical difficulties.
Schools that face administrative or logistical challenges with deregistration are encouraged to reach out to SARS. The revenue service has indicated it's open to finding workable solutions on a case-by-case basis, including tailored payment arrangements where necessary.
What this means for household budgets and financial planning
Education costs are already one of the heaviest financial commitments South African families carry. Annual school fees at independent schools can run anywhere from R30,000 to well over R200,000 per child, depending on the institution. If schools do pass on some or all of their exit VAT liability through fee increases, parents will need to factor that into 2027 planning — and beyond.
For families already stretched thin, even a modest uptick in annual fees can create cash-flow challenges, especially if the increase comes mid-year or without much notice. It's worth asking your school's bursar or finance office how the VAT deregistration will affect fees for the coming year, and when any adjustments will be communicated.
Could this influence borrowing and repayment decisions?
Some parents may find themselves considering short-term finance options to smooth out lump-sum school payments or cover unexpected increases. If you're in that position, it's worth taking a step back and asking whether you can realistically afford the repayments before committing to any loan.
Personal loans can be a useful tool when used responsibly, but they're not a substitute for a sustainable household budget. If school fees are consistently outpacing your income, it may be time to have a broader conversation — either with the school about structured payment plans, or with a qualified financial adviser about restructuring your commitments.
At Spring Loans, we always encourage South Africans to borrow thoughtfully and only when the repayments fit comfortably within their monthly budget. Consider whether you can afford the instalments over the full term of the loan, not just this month.
Is there any relief on the horizon for schools?
There's been some discussion around whether government might grant schools an amnesty on input VAT previously claimed but now deemed incorrect under the amended rules. However, National Treasury has stated that such a decision would require broader government approval and isn't something SARS or the tax policy team can greenlight on their own.
The Independent Schools Association of Southern Africa has taken the proposal to the Department of Basic Education, but as of now there's been no formal response or commitment. In the meantime, Treasury has reiterated that it remains committed to working with schools to find practical solutions, and that the legislative change was designed with schools' interests in mind — even if the rollout has been bumpy.
What parents should do now to prepare for 2027
Stay informed. If your child attends a private school, it's worth asking the school's bursar or finance office directly how the SARS tax changes in South Africa will affect fees for 2027 and beyond. Most schools will have clarity on their exit VAT liability by the end of 2026, and responsible institutions will communicate fee adjustments well in advance of the new school year.
If you're budgeting for the year ahead, build in a buffer for potential increases. Even a 3–5% rise in annual fees can mean an extra few thousand rand per child you'll need to cover. Multiply that across two or three children, and the impact becomes significant.
Review your broader financial picture
School fees don't exist in isolation. They sit alongside bond repayments, car finance, groceries, medical aid, fuel, and everything else that makes up a modern South African household budget. If an increase in one area threatens to tip your budget into the red, now is the time to review your overall spending and identify where you can trim or restructure.
Sometimes that means cutting discretionary expenses like entertainment subscriptions or eating out. Other times it might mean consolidating debt or refinancing high-interest accounts. Whatever your situation, the key is to act before you're in arrears — not after.
- Household action: Ask your school for a fee projection for 2027 — Why it helps: Gives you time to budget and adjust spending in other areas
- Household action: Build a 5% buffer into your education budget — Why it helps: Cushions against unexpected increases or add-on costs
- Household action: Review your household budget line by line — Why it helps: Identifies discretionary spending you can cut if needed
- Household action: Consolidate high-interest debt if possible — Why it helps: Frees up monthly cash flow for fixed commitments like school fees
- Household action: Speak to a financial adviser if fees consistently strain your budget — Why it helps: Helps you restructure finances or explore alternatives sustainably
The bigger picture: why tax changes matter for everyday South Africans
These SARS tax changes might seem like an administrative issue for schools, but they're a reminder of how policy shifts — even technical ones — can flow through to household finances in unexpected ways. VAT law, tax thresholds, deduction rules: they all sound distant and bureaucratic until they touch your monthly budget.
For parents, the lesson is simple. Stay engaged with the institutions you pay into, whether that's a school, a lender, or a service provider. Ask questions. Plan ahead. And when legislation changes, take the time to understand what it means for you — not just for the organisations it's aimed at.
We've seen this pattern play out before. A change in interest rate policy affects bond repayments. A shift in fuel levy changes the cost of the school run. A tweak to tax rules for schools shifts the calculation behind next year's fees. It all connects.
Frequently asked questions
When do private schools have to pay exit VAT?
Schools become liable for exit VAT from 1 January 2027. SARS allows them to spread the payment over twelve equal monthly instalments throughout 2027. Schools needing longer payment terms must arrange that directly with SARS in advance.
Will all private schools in South Africa have to deregister from VAT?
Schools registered under the South African Schools Act that are currently VAT vendors must deregister. This includes most independent and private schools. Schools conducting qualifying welfare activities may be exempt, but these cases are limited. Schools unsure of their status should consult a tax practitioner or contact SARS directly.
Can parents claim tax relief on school fees if fees go up?
No. School fees paid to private schools in South Africa are not tax-deductible for individual parents. There is no personal income tax relief available for education costs at independent schools, even if fees increase due to the VAT changes.
What should I do if my school raises fees mid-year because of exit VAT?
Speak to the school's finance office first. Schools are generally required to give notice of fee increases and may offer payment plans or bursaries for families in financial difficulty. If the increase creates genuine hardship, ask whether instalment arrangements or fee relief programmes are available. Do not take on debt to cover fees without carefully considering whether you can afford the repayments.
This article is for general informational purposes only and is not financial advice. Spring Loans is a registered South African credit provider — please speak to a qualified financial adviser or registered credit provider before making borrowing decisions.
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