Budget 2027 cuts taxes for M40 and SMEs, lowers threshold for 30% rate to RM1m

Budget 2027 brings tax relief for middle-income earners and smaller businesses, while raising the 30% top marginal tax rate threshold for higher earners. The new budget, tabled by Prime Minister Anwar Ibrahim, lowers the tax threshold for the 30% rate to RM1 million, down from RM2 million. This change means that individuals with taxable income above RM1 million will face the higher tax rate on the portion of their income above the threshold.

Additionally, the basic individual tax relief is increased from RM9,000 to RM12,000, a revision not seen since 2010. Tax rates have also been reduced by 1% for income bands ranging from RM70,000 to RM150,000. For Micro, Small and Medium Enterprises (MSMEs), the corporate tax rate on the first RM150,000 of chargeable income is reduced from 17% to 16%, while the rate for income above RM150,000 up to RM600,000 drops from 17% to 17%.

KPMG's Soh Lian Seng described the budget as "inclusive," citing measures to ease household financial pressures, support businesses, and improve earning capacity. PricewaterhouseCoopers' Steve Chia noted that the RM510 billion budget remains expansionary while the fiscal deficit narrows from 3.6% in 2026 to 3.3% in 2027. MSMEs, contributing to 40% of the economy and employing half the workforce, are expected to benefit from the lower corporate tax rates, potentially saving up to RM6,000 annually.

Other budget measures include expanded stamp duty relief for first-time homebuyers and full stamp duty exemptions for projects involved in rescuing abandoned housing projects. The government aims to balance relief and incentives with sustainable revenue collection, with stronger tax compliance playing a key role in this effort.