What is a tax-free savings account?
A tax-free savings account (TFSA) lets your savings build without tax taking a share of what they earn each year. It is an approved savings or investment account where you pay no income tax, dividends tax or capital gains tax on what it earns. You do not get a tax deduction on what you put in, but everything it earns stays tax-free.
Banks, investment managers, insurers and other approved providers offer TFSAs. They can hold things such as fixed deposits, unit trusts and exchange-traded funds (ETFs).
How much can you put in?
| Limit | Amount |
|---|---|
| Each tax year, from 1 March 2026 | R46,000 |
| Over your lifetime | R500,000 |
- Any unused part of the annual limit falls away. It does not carry over to the next tax year.
- The limits apply to all your TFSAs added together.
- Growth does not count towards the limits. Only what you put in does.
- If you go over either limit, SARS charges 40% tax on the excess.
Can you take money out?
Yes, at any time and tax-free. Withdrawals do not give you back any of your limit, however. If you take R20,000 out and later put it back, that counts as a new R20,000 contribution.
To move your TFSA to another provider, ask for a formal transfer between providers. If you withdraw the money and reinvest it yourself, it uses up your limits again.
Things to know
- It is not an everyday account. You cannot use it for debit orders or ATM withdrawals.
- Time matters. The tax you save grows with what the account earns, so a TFSA suits money you can leave invested for years.
- Children have their own limits. A TFSA in a child’s name uses their annual and lifetime limits, which will then not be available to them later.
- Costs still apply. Check the fund and platform fees, as these reduce what you earn.
Who it suits
A TFSA may suit you if you are saving for longer-term goals and want to keep access to the money, or if you are building savings for your child’s education. If you also want a tax deduction now, a retirement annuity does a different job, and you can use both.