Budget 2026 Explained: 7 Highlights That Actually Affect You

Estimated reading time: 8 minutes

Budget 2026 is set at RM 419 billion, slightly lower than the RM421 billion from last year’s initial tabling,  making it the first time in five years Malaysia’s budget didn’t grow.

Some economists call it a sign of discipline, others think the government is saving bullets for 2027, to prepare for GE16 in 2028. Either way, what matters most isn’t the total figure, it’s where the money goes, and how it affects you and me.

So, let’s go through the 7 key highlights you should know.

Source: The Edge Malaysia

Highlight 1: Targeted Subsidies Saving + Benefits for All Malaysians

Targeted Subsidies Saving

For decades, we’ve had blanket subsidies (meaning even foreigners and big corporations enjoyed the same fuel benefits as Malaysians). 

But with the BUDI95, Malaysia’s new targeted subsidy system is expected to save RM2.5 billion from RON95 alone. Plus, RM5 billion savings from diesel, RM2 billion savings from chicken and eggs, and RM6 billion savings from electricity restructuring, the government has saved roughly RM15.5 billion in total this year.

Benefits for All Malaysians

i) SARA 
With this savings, we can expect a one-off RM100 cash aid for everyone aged 18 and above, coming mid-February 2026, right before CNY and Ramadan.

ii) STR (Sumbangan Tunai Rahmah)
In conjunction with Deepavali, the STR Phase 4 payout worth RM2 billion (mainly for the lower income households) has been advanced to 18 Oct. 

iii) 50% Toll Discount
A two-day 50% toll discount in conjunction with Deepavali. (Note: unofficial source says 18–19 October, but still awaiting confirmation)

Highlight 2: “Sin Tax” on Alcohol & Tobacco

Effective 1 November 2025, excise duties are going up:

• 10% for alcohol
• 2 sen per stick for cigarettes
• RM20/kg for heated tobacco
• RM40/kg for cigars, cheroots and cigarillos

While the intention is to promote better public health, here’s the issue: Malaysia already has the second-highest beer excise rate in the world, raising it further could push more demand toward the black market, which already accounts for around 25% of total beer consumption and costs the government over RM1.2 billion loss in tax revenue.

In fact, the beer industry, led by Carlsberg and Heineken, contributed RM3.3 billion in tax revenue about 1.5%) and RM7.1 billion in GDP (about 0.4%) to our country. 

Highlight 3: Vehicle Related

Loophole closed: Langkawi and Labuan tax exemption 

There will be no more Langkawi and Labuan tax exemption for vehicles valued more than RM300,000.

So if you haven’t heard of this loophole, here’s the fun fact: 
Before this new budget, vehicles in Langkawi and Labuan were exempted from tax with the goal to help local residents to afford transportation. But, for many years, this has been exploited by the rich and these 2 places became a tax haven for them. They basically buy their luxury cars and then park them in Langkawi. And for a maximum of 90 days, they get to ship out their car to outside of Langkawi and then drive it anywhere.

Scrap You Car for RM4,000

For the rest of us, here’s better news: a matching grant of up to RM4,000 to scrap vehicles aged 20 years and above.

The goal: encourage safer, cleaner (lower emissions), and locally produced cars.

For example: If Proton offers you RM4,000 under their scrappage programme, government will match another RM4,000 – in total RM8,000. 

Tax exemption update on CBU (Fully imported EVs) and CKD EVs

CBU EV tax exemption (that has been extended twice since 2022) will end on 31 Dec 2025. So expect a 20–30% price hike post-incentive. 

CKD EV incentives continue till end-2027. Winners for this are obviously local brands like Proton which has recently just launched their EV plant in Tanjung Malim. 

Highlight 4: Newly Added & Expanded Tax Reliefs 

Tourism Relief up to RM1,000 (NEW)

A new RM1,000 tourism tax relief allows you to claim visits to local attractions like museums, Zoo Negara, and theme parks. This is in line with the Visit Malaysia 2026, where the tourism ministry gets RM700 million (RM300 million more than last year) to hopefully attract 47 million visitors and generate RM329 billion in tourism income.

Expanded Individual Relief

The government has also expanded the RM2,500 individual tax relief. Previously it was only for individuals who spent on EV charging facilities and the food waste composting machines, but starting from 2026-2027, it will include purchases of food waste grinder and CCTV for household use. 

As for parents, if your child (up to 12 years old) goes to day care or after-school centres, your tax relief can claim up to RM3,000. And if you are paying for education and medical insurance premiums for children up to 18 years old, you can claim another RM3,000 relief as well.

Highlight 5: Gig Workers Protection

EPF i-Saraan Plus

Budget 2026 finally offers a real safety net for gig workers (like riders, drivers, freelancers) with over 1.2 million people in total. Under the new i-Saraan+ scheme, if you contribute RM3,000 a year to EPF, the government rebates RM600 (lifetime cap RM6,000). 

PERKESO 

For e-hailing and p-hailing drivers, PERKESO is now compulsory, but the government will subsidise 70% first-time registrants in the first year and 50% in the second.

EPF Account 2 Opens for Medical Insurance

As for healthcare, your EPF Account 2 (or Account Sejahtera) can now be used to buy basic health or Takaful insurance under the new Malaysian Health Insurance Takaful (MHIT) plans, set to launch at the end-2025. It’ll cover preventive care and even pre-existing conditions.

Highlight 6: AI Nation by 2030

Regional Cloud Hub

Malaysia wants to become an AI nation by 2030, and the budget reflects that. So, about RM2 billion goes to Malaysian Communications and Multimedia Commission (MCMC) to develop a Sovereign AI Cloud. And the goal of this is to protect our national data while positioning Malaysia as a regional cloud hub. 

In total, RM5.9 billion has been allocated for digital and AI development, and this allocation is doubled from last year’s amount. For SMEs, there is also 50% tax deduction for investment in AI-related training. 

Semiconductor

The semiconductor sector gets another RM1.5 billion, plus RM550 million from Khazanah and KWAP under the National Semiconductor Strategy to help local players partner with global tech firms for better innovation. 

Highlight 7: Infrastructure & Development

RM81 billion is allocated for development, a slight cut from RM86 billion last year.

Railways

• LRT Kelana Jaya: 25 new coaches coming next year.
• East Coast Rail Link (ECRL) Phase 1 (Gombak to Kota Bharu): Targeted for completion by end of Dec 2026, with operations starting Jan 2027 (cutting travel from 6 hours to 4 hours).
• MRT3: Operations targeted by 2032.

Runways

• Malaysia Airports Holdings (MAHB) updates: RM2.3 billion will go to upgrade of airports in Penang, Kota Kinabalu, Tawau, and Miri, scheduled for completion by 2028.

Highways

• Pan Borneo highway: RM1.67 billion allocated this year, part of the massive RM48 billion project since 2015.
• Sarawak-Sabah Link Road (SSLR 1): Expected completion by November 2026.
• SSLR 2: Expected completion by mid-2029.

Notable Updates You Shouldn’t Miss

• Carbon Tax: starting with iron, steel, and energy industries.
• Lemon Law: Long-overdue consumer protection which includes defective vehicles (refund/replacement rights).
• School aid: RM150 per student in government schools (distributed via teachers).
• PTPTN: Conversions to scholarships for qualifying lower-income public uni students; first-class honours loan waivers is confirmed.
• First homes: Stamp duty exemption for properties ≤RM500k extended to end-2027.

Final Thoughts

Budget 2026 in my humble and totally non-professional opinion, seems to be quite politically influenced to prepare the MADANI government for the next GE, with a huge emphasis on pleasing the East Malaysians – especially with Sabah having their election in the next 2 months. 

And as always, the winner goes to B40. For M40, there is nothing too significant. And for T20, no more cheap Mclaren & Lamborghinis for them.

If you prefer a video version of this article, I have made a video covering the exact same thing – do check it out here!

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