Tax-free savings accounts explained

What a TFSA is

Tax-free savings accounts (TFSAs) were introduced in 2015 to encourage South Africans to save. Any interest, dividends or capital gains earned inside the account are free of tax, and you pay nothing when you take money out. Banks offer TFSA savings and fixed-deposit accounts, while asset managers and investment platforms offer TFSA unit trusts and exchange-traded funds (ETFs).

The limits for 2026/27

The limits apply per person across all your TFSAs added together, and the annual limit runs per tax year, from 1 March to the end of February. Unused room does not roll over: if you put in R 20 000 this tax year, you cannot add the missing R 26 000 next year. At R 46 000 a year it takes just under 11 years to reach the lifetime limit.

Withdrawals and transfers

You can withdraw at any time, but money you take out still counts toward your limits. If you contributed R 40 000 this year, withdraw R 10 000 and put it back, you have used R 50 000 of your annual limit and will pay the 40% penalty on R 4 000. A direct transfer from one provider’s TFSA to another’s is different: it does not count as a new contribution, provided the providers move the money between them rather than paying it to you.

What to invest in

Because the benefit is the tax you avoid on growth, a TFSA is most valuable for long-term money in investments that can grow, such as a share or balanced unit trust held for ten years or more. A TFSA cash account is useful for an emergency fund or short-term goal, but the tax saved on interest is smaller, and most people already earn interest below the annual interest exemption. Check the fees too: a 1.5% annual fee can cancel out much of the tax advantage over time.

TFSA or retirement annuity?

A retirement annuity (RA) gives you a tax deduction on the way in, and most of the money stays locked until retirement. A TFSA gives no deduction, but everything you take out is tax-free and you can reach it whenever you need to. Many people use an RA first to bring down their income tax, then a TFSA for flexible long-term savings.

Frequently asked questions

Can I have more than one TFSA?

Yes, with different providers, but the R 46 000 annual and R 500 000 lifetime limits apply to all of them together.

Do I need to declare my TFSA on my tax return?

Your provider reports contributions to SARS on an IT3(s) certificate. You do not pay tax on the growth, but SARS uses the information to check that you stayed within the limits.

What happens to my TFSA when I die?

It forms part of your estate. Your heirs cannot take over the tax-free status, so the money comes out and they would need to start their own TFSA.

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