Budget 2027 in plain English for your household and your business

It is the fifth MADANI Budget and the second under the 13th Malaysia Plan, tabled by Prime Minister and Finance Minister Anwar Ibrahim. It rests on three thrusts: raising the ceiling of growth, raising the floor of living standards, and governance reform.

For most readers the practical headlines are a higher individual relief, lower tax for middle-income earners and MSMEs, a RM2,000 minimum wage from June 2027, and incentives for digital, AI and green investment extended to 2030.

Both figures are correct. Federal government spending is RM459.8 billion: RM376.8bn operating and RM83bn development. Add roughly RM50bn from GLICs, public-private partnerships and statutory bodies, and total public spending reaches RM510 billion, up from RM470bn in 2026.

• Fiscal deficit target: 3.3% of GDP, down from about 3.5%
• GDP growth: 4.2% to 5.2% in 2027 (4.8% to 5.3% in 2026)
• Government revenue: RM380.8bn, up 4.7%, including a RM32bn PETRONAS dividend
• Inflation forecast: 1.8% to 2.8%
• Subsidies, aid and incentives: above RM80bn, with fuel subsidies around RM40bn

Most income tax changes apply from year of assessment (YA) 2027, which covers income earned in calendar 2027 and filed in 2028. Several indirect tax and stamp duty items start on 1 January 2027. Everything here is a proposal until the Finance Bill is passed, so check details before acting on large decisions.

The automatic relief every resident individual gets goes from RM9,000 to RM12,000, the first increase since 2010. That alone cuts chargeable income by RM3,000 for every taxpayer.

Two bands drop by one percentage point: chargeable income of RM70,001 to RM100,000 goes from 19% to 18%, and RM100,001 to RM150,000 goes from 25% to 24%. Combined with the higher relief, the government expects up to RM1,600 more disposable income for about 5 million taxpayers.

Chargeable income between RM1 million and RM2 million moves from 28% to 30%, so the 30% rate now applies to everything above RM1 million.

The RM2,500 lifestyle relief is widened to include AI subscription fees and the cost of pet adoption and vaccination. The cap stays at RM2,500, shared with books, gadgets and internet. Keep your subscription receipts from 2027.

Within the existing RM10,000 medical relief: postnatal care services (up to RM3,000) and breastfeeding equipment paid by you or your spouse (up to RM1,000).

The RM8,000 relief now covers all types of care for parents and grandparents at home, in day care or in residential centres, not only medical care. Verification by a registered medical practitioner is no longer needed.

The RM7,000 education and skills relief now covers every field of study. Inside that cap: upskilling or self-improvement courses up to RM3,000, and courses, classes or tuition unrelated to work for you, your spouse or children up to RM2,000.

Sports shoes can be claimed up to RM300 within the RM1,000 sports equipment relief.

The RM350 SOCSO relief now includes mandatory LINDUNG KENDIRI contributions, with an extra relief of up to RM150 for voluntary contributions to LINDUNG 24 Jam and LINDUNG KENDIRI.

Relief of up to RM1,000 for entrance fees to tourist attractions and cultural or arts programmes is extended to YA 2027, alongside Visit Malaysia Year running into 2027.

For qualifying MSMEs: 14% on the first RM150,000 of chargeable income (from 15%) and 16% on RM150,001 to RM600,000 (from 17%). Income above RM600,000 stays at 24%. The maximum saving is RM6,000 a year, and about 300,000 MSMEs stand to benefit.

MSME means paid-up capital of up to RM2.5 million (or LLP capital contribution up to RM2.5m) and annual gross business income of up to RM50 million.

Assets costing up to RM3,000 each (from RM2,000) can be fully claimed in one year. Non-MSMEs see their overall cap rise from RM20,000 to RM30,000. MSMEs keep having no overall cap.

The accelerated capital allowance (20% initial plus 40% annual) on ICT equipment, computer software, customised software development fees and locally made plant and machinery is extended for four years to 31 December 2030. In practice you can write off most of a digital investment within two years.

For companies that are not MSMEs, salary costs will only be deductible if paid through financial institutions or cashless channels allowed under the Employment Act 1955. MSMEs are exempt from this rule. BDO notes it starts from YA 2028.

The national minimum wage goes from RM1,700 to RM2,000 from June 2027, covering more than 4 million workers. MSMEs with annual sales below RM50 million are exempt. The government also plans a RM2,500 starting minimum for semi-skilled roles and graduates, and GLICs and GLCs raise their living wage benchmark to RM3,400.

The MediAsas plan launches in January 2027. EPF members under 55 can pay premiums from Akaun Sejahtera. SMEs with fewer than 75 employees get a RM200 subsidy per worker on the first-year premium, for up to 50 workers per company.

HRD Corp plans 3 million training opportunities from a RM3 billion fund, and RM8 billion goes to TVET across ministries. Companies running BAKAT MADANI training programmes can deduct the cost from 29 June 2026 to 31 December 2030, with a target of 30,000 new jobs in 2027.

Employers who repay PTPTN loans on behalf of full-time employees get a tax deduction for two years. The employer cannot recover the amount from the employee, and the employee cannot be the owner or a family member.

• RM30 million to MDEC to help 4,000 MSMEs adopt AI and automation, and to train and certify 5,000 AI professionals
• Nearly RM15 million to AI Malaysia Berhad, toward 200,000 AI-skilled professionals
• A planned Sovereign AI Cloud to keep national data under Malaysian control
• RM6 billion across ministries for research, development and commercialisation

Pair this with the ICT capital allowance and the lifestyle relief for AI subscriptions, and the Budget clearly rewards businesses that adopt AI with a plan rather than ad hoc.

A further 100,000 free AI subscription slots go to young Malaysians, now including access to apps such as ChatGPT. Youths who complete approved volunteer hours also receive a RM100 e-wallet credit.

An E-Commerce Bill will be tabled to hold online platforms and sellers accountable and to curb unregulated foreign competition that hurts local MSMEs.

Manufacturers today only get sales tax exemption on eligible machinery and inputs if bought directly or from registered manufacturers. A new refund lets local traders and distributors reclaim sales tax paid on machinery, spare parts, equipment and inputs for pharmaceuticals, animal feed, fertilisers and pesticides supplied to manufacturers.

• RM32bn in financing guarantees through SJPP and CGC, with the guarantee limit raised to RM50m
• RM6.6bn in microfinance: AIM RM3bn, TEKUN RM1.3bn, BSN RM1.7bn
• An extra RM5bn Bank Negara facility for SMEs affected by the West Asia conflict
• RM1bn in guarantees for local mergers and acquisitions
• Matching grants of up to RM5,000 for a first halal certification

Stamp duty above RM10 is waived on P2P financing agreements between MSMEs and investors, and on second-tier supplier financing agreements that let MSME suppliers to mid-tier companies get paid early. CAKNA I and II remissions for small government contractors are reintroduced.

Instruments signed by individuals or businesses to open savings and current accounts are fully exempt from stamp duty.

Companies doing green technology projects, EV charging projects or buying green assets for their own use can get an investment tax allowance of up to 100%, now extended to 31 December 2030. Households get a rebate of up to RM200 on 4 or 5-star energy-efficient air conditioners and fridges under Nur Madani.

Malaysian first-time buyers pay no stamp duty on the transfer and loan for homes up to RM500,000. For homes priced up to RM750,000, the first RM500,000 is fully exempt and the balance gets 50% off. SJKP also offers up to RM20bn in housing guarantees for about 80,000 first-time buyers, aimed at the self-employed.

Full stamp duty exemption returns for transfers and loans signed by rescue contractors, developers and original buyers of certified abandoned projects.

Service tax on elderly care drops from 8% to 6%. Annual care fees of up to RM96,000 per person at registered centres are fully exempt. More than RM40m goes through HRD Corp to train 8,000 elderly care workers.

Senior citizen aid rises to RM1.3bn. The minimum civil service pension goes from RM1,000 to RM1,350 a month, and pensioners and veterans receive a RM750 special payment in two tranches.

STR and SARA total RM16bn. STR recipients get SARA of up to RM150 a month. Adults aged 18 and above who are not on STR, including the M40, receive RM100 in SARA twice, around Aidilfitri and Merdeka, reaching about 13 million people.

• EPF matching of up to RM600 a year (RM6,000 lifetime) for e-hailing and p-hailing workers
• 35% SOCSO matching, rising to 50% if platforms co-fund
• Government covers 70% of SOCSO for 200,000+ self-employed in 17 non-mandatory sectors
• RM270m BSN and Agrobank financing to start a business or buy a first home
• A RM160m government and Grab package from 2027

Every citizen will be registered as an EPF member automatically at 18 so retirement saving starts earlier.

Borrowers earning up to RM2,500 a month can defer repayment next year. Those earning RM2,500 to RM3,000 pay a minimum of RM50 a month. Borrowers with no arrears who pay consistently get a 10% discount.

The Education Ministry gets nearly RM69bn. School aid rises to RM200 per pupil, Form Six students get a RM2,500 living allowance for the first time, and the FLYsiswa flight subsidy goes up to RM500.

The Health Ministry gets RM47.7bn. More than 9,000 contract doctors are offered permanent posts, RM1.2bn upgrades public facilities, and private hospital bills move to standard charge categories from 2027.

Visitors who stay at least 48 hours can bring back duty-free goods worth up to RM10,000 (from RM1,000). Tobacco, alcohol, vapes and tyres are excluded. More Langkawi-made products get import duty exemption.

Entertainment duty exemptions in the Federal Territories run to 31 December 2030, with cinemas and theatres taken to 0%. Events at Stadium Merdeka and Stadium Negara become exempt from 1 January 2027.

Over 10,000 small traders renting DBKL premises, including markets and hawker centres, get a 50% rental discount throughout 2027.

The debt threshold for bankruptcy goes from RM100,000 to RM150,000 starting 2027.

New GSH companies pay 5% on qualifying income. Existing Principal Hub or GSH companies pay 15% up to their baseline income and 5% above it. Incentives renew in five-year blocks up to 30 years, with withholding tax and stamp duty exemptions for treasury activities, including under the JS-SEZ package.

Tax exemptions for individuals investing through approved equity crowdfunding platforms and for angel investors in early-stage tech startups are extended to 31 December 2030. Khazanah and KWAP vehicles also put RM450m into startups.

Shariah-compliant fund managers get a 40% income tax exemption for YA 2028 to 2030. Sukuk Prisma issuers can deduct SC-approved issuance costs for YA 2027 to 2030, and grants under the SRI Sukuk and Bond Grant Scheme are tax-exempt.

Eligibility and how the Reinvestment Allowance is granted are being reviewed to make it more targeted. If you plan a manufacturing expansion that relies on RA, wait for the details before committing.

JS-SEZ has drawn RM132bn in investments, with its blueprint due by year end. Nexus Sedenak targets RM12bn and 45,000 jobs, and Forest City adds a multi-family office framework on top of the single-family office scheme.

• Malaysian shipping income stays tax-exempt to YA 2036, with stamp duty on ship loans capped at RM2,000 or RM5,000
• Local automotive vendors relocating to the Automotive Hi-Tech Valley in Tanjong Malim can deduct up to RM5m of costs (2027 to 2030)
• Incentives for organising international conferences, incentive trips and trade exhibitions extended to YA 2030

Donations to public universities qualify for a deduction of up to 10% of aggregate income. Contributions of food and equipment to Dapur Siswa MADANI are deductible from 2027 to 2030, and school contribution funds (TSUWAS) can now be used for operating costs and repairs.

Spouses of Category I employment pass holders on a dependant pass may work from 1 January 2027, subject to conditions. DE Rantau Nomad Pass holders at their two-year limit can extend for two more years.