Budget 2027: what it means for small businesses and employers

Budget 2027 was tabled in Parliament on 9 October 2026. For small business owners and employers, the headline items are a cut in SME tax rates, a bigger personal relief for staff, a higher minimum wage, and a new rule on how salaries must be paid. Most of the tax changes below are proposals. They become law only when the Finance Bill is passed, and the details can still change. The minimum wage change will be made through a separate minimum wages order. Lower tax rates for SMEs The Ministry of Finance proposes cutting the two SME tax bands by one percentage point each, from year of assessment (YA) 2027: - First RM150,000 of chargeable income: 14% (now 15%) - RM150,001 to RM600,000: 16% (now 17%) - Above RM600,000: unchanged at 24% The definition of an SME stays the same: paid-up ordinary share capital of RM2.5 million or less (or LLP capital contribution of RM2.5 million or less) and annual sales of no more than RM50 million. The government estimates about 300,000 SMEs will save up to RM6,000 each a year. Small asset purchases The limit for a "small value asset" that can be written off in full rises from RM2,000 to RM3,000 per item, from YA2027. SMEs still have no annual cap. Larger companies get a higher cap of RM30,000 a year, up from RM20,000. Salaries must go through the bank From YA2028, companies that are not SMEs will get a tax deduction for salaries only if they pay through a financial institution or an approved cashless method. Other expenses are not affected, and SMEs are excluded. Even so, paying wages by bank transfer is a good habit for any business. Minimum wage The minimum wage will rise from RM1,700 to RM2,000 a month from June 2027. Businesses with annual sales under RM50 million are to be exempt, to give them time to adjust. The minimum wages order that sets the exact date and terms has not been gazetted yet. The government also plans a RM2,500 minimum for semi-skilled jobs and graduates. Employer groups have asked how the RM50 million sales test will be assessed. Guidelines have not been issued yet. Payroll and PCB Most employees may see lower monthly tax deductions (PCB) once the proposals take effect from YA2027: - Individual relief rises from RM9,000 to RM12,000, the first increase since 2010 - The 19% band (RM70,001 to RM100,000) drops to 18% - A new RM100,001 to RM150,000 band is taxed at 24% instead of 25% - The 30% top rate will apply from RM1 million, instead of RM2 million, so income between RM1 million and RM2 million is taxed more (30% instead of 28%) Several personal reliefs are also widened, including care for parents and the SOCSO relief, which now covers compulsory LINDUNG Kendiri contributions plus up to RM150 for voluntary cover. Watch for LHDN's updated PCB schedule before January 2027 payroll runs. As of 20 October 2026, LHDN has published only the 2026 specification, and the Finance Bill had not yet been tabled. Other help for employers - Employers who repay staff PTPTN loans between 1 January 2027 and 31 December 2028 can claim a tax deduction, subject to conditions. - SMEs with fewer than 75 staff will get a RM200 first-year subsidy per worker (up to 50 workers) for the new MediAsas health plan. SST and e-invoicing There is no change to the general SST rates. From 1 January 2027, local traders who supply certain machinery and manufacturing inputs to manufacturers can claim back the sales tax they paid. Service tax on elderly care falls from 8% to 6%, with full exemption for fees up to RM96,000 a year at registered centres. The budget has no new e-invoicing measures. Separately, since 1 September 2026, businesses with annual sales under RM3 million are exempt from e-invoicing, though some group companies are not. Grants and financing - Matching grant of up to RM5,000 for SMEs seeking halal certification for the first time - Microfinancing increased to RM6.6 billion in 2027, through AIM, TEKUN and BSN - From 1 January 2027, stamp duty capped at RM10 on peer-to-peer financing agreements, and fully waived on opening savings and current accounts What to do now - Check whether your company meets the SME definition for the lower rates - Review your YA2027 tax estimate (CP204) once the Finance Bill is passed - Update payroll for the new reliefs, and plan for the June 2027 minimum wage if you are above RM50 million in sales This article is general information, not tax advice. Measures may change before they become law. Synco's chartered accountants handle bookkeeping and tax filings, with accounting from RM 300 a month.