Top Highlights from Malaysia Budget 2026 You Should Know

On 10 October 2025, the Malaysian government tabled the Budget 2026 in Parliament under the theme “The Fourth Madani Budget: The People’s Budget” — signalling a strategic blend of fiscal discipline, inclusive growth, and digital-green transformation. 

For businesses, households and individuals, understanding the highlights of Budget 2026 Malaysia is essential — from subsidy reforms and tax reliefs to incentives for green and high-value sectors.
 

1. Significant Budget Allocation & Economic Projections

Budget 2026 outlines a total federal expenditure of approximately RM470 billion — one of the largest in Malaysia’s history. 

Key economic targets include:

• Forecast real GDP growth for 2026 between 4.0 % and 4.5 %. 

• Anticipated headline inflation for 2026 in the range of 1.3 % to 2.0 %.

• Budget deficit target is set below 3.5 % of GDP, aligning with the 13th Malaysia Plan (13MP) framework. 

 

2. Subsidy Realignment and Social Support

A prominent element of Budget 2026 is the continued push for targeted subsidies rather than blanket subsidy distribution, aiming to reduce fiscal leakage and improve efficiency.

Major measures include:

• Expansion of social assistance programmes such as the Sumbangan Tunai Rahmah (STR) and the Sumbangan Asas Rahmah (SARA) — reinforcing the living-standards floor for Malaysians.

• Vehicle scrapping incentive: owners of vehicles older than 20 years who purchase a new national car model may receive a matching government/automaker grant up to RM4,000. 

• Significant allocations to disaster mitigation, small-holder welfare, and infrastructure for Sabah & Sarawak (with development allocations of RM6.9 billion and RM6.0 billion respectively) are also part of the subsidy and support framework. 

 

3. Tax Reforms, Reliefs and Administration Enhancements

Budget 2026 encompasses a range of tax reforms focused on strengthening administration, broadening the tax base, and introducing new targeted reliefs.

Key highlights:

• Full implementation of an e-invoicing system and a stamp duty self-assessment regime scheduled for 2026, marking a digital-tax compliance shift.

• Introduction of a carbon tax initially targeting iron, steel, and energy sectors — part of the green transition agenda. 

• Extended tax exemption on foreign-sourced dividends and capital gains until 2030 for certain categories of taxpayers. 

• Stamp duty exemptions for first-time homebuyers on properties up to RM500,000 (extended to 31 December 2027) and increased stamp duty for foreign buyers (4 % → 8 %) per the tax commentary.

 

4. Strategic Incentives for Digital, Green and High-Value Sectors

In alignment with the theme of raising the ceiling of national growth, Budget 2026 emphasises incentives for high-value manufacturing, digital economy, and sustainability.

Highlights include:

• The Outcome-Based Incentive Framework (OBIF) to be rolled out in Q1 2026 for manufacturing and in Q2 for services — linking incentives to job creation and regional development. 

• RM180 million allocated for the New Industrial Master Plan (NIMP) Industry Development Fund supporting pharmaceuticals, semiconductors, AI, digital and sustainability sectors. 

• A targeted investment of RM550 million by Khazanah Nasional and Kumpulan Wang Persaraan (KWAP) into the semiconductor ecosystem. 

 

5. Support for SMEs and Regional Development

Budget 2026 signals enhanced commitment to regional equity and SME support — raising the floor of living standards and business participation across Malaysia.

Key points include:

• Expansion of SME financing guarantee facilities from RM40 billion to RM50 billion to bolster local entrepreneurship. 

• Allocated funds to support high-potential Bumiputera enterprises (RM40 million) and rural development. 

• Development allocations for Sabah & Sarawak, fostering regional connectivity and economic inclusion. 

6. What Individuals and Households Should Watch

While many of the measures are enterprise- and investment-focused, there are clear implications for everyday Malaysians:

• Subsidy retargeting may lead to price adjustments of major goods or fuel for certain segments, though core beneficiaries remain the B40 and M40 groups.

• Digital tax compliance and property tax reforms may affect homeowners and property investors progressively.

• Job quality improvement and regional investment may offer wider employment opportunities in high-value sectors.

Conclusion

The Malaysia Budget 2026 is a cornerstone in the country’s transition toward a digital-green inclusive economy. With focus on raising productivity, improving living standards, and enhancing governance, the budget lays key foundations for the 13th Malaysia Plan era.

For Malaysians — whether households, businesses or investors — staying informed about the rollout of these measures (especially tax reforms and incentives) will be critical.
 

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References
Malaysia Budget 2026: The Rakyat’s Budget.” Alvarez & Marsal. October 2025. Alvarez & Marsal
“Cover Story – Budget 2026: Highlights of Budget 2026.” The Edge Malaysia. October 2025. The Edge Malaysia
“Malaysia Budget 2026 Highlights.” BDO Malaysia. October 2025. bdo.my
“Malaysia Budget 2026 (Take 5 Business Alert).” EY. October 2025. EY
“Malaysia Budget 2026.” Wong & Partners reaction statement. October 2025. wongpartners.com