Frequently Asked Questions
What is PAYE in South Africa?
PAYE (Pay As You Earn) is the income tax deducted from an employee's salary by their employer and paid to SARS each month. The amount is determined by SARS's annual tax tables and reduced by personal rebates and medical scheme tax credits.
How is South African income tax calculated?
SARS uses seven progressive bands. The first R245,100 of taxable income is taxed at 18%; each subsequent band has a higher marginal rate up to 45% on income above R1,878,600. Your taxable income is gross minus deductible retirement contributions. After the bracketed tax is calculated, the primary rebate (R17,820 for 2026/27) plus age-based rebates and medical-aid credits are subtracted.
What is UIF and who pays it?
UIF (Unemployment Insurance Fund) is a 1% payroll deduction on gross salary, capped at R177.12 per month (R2,125.44 per year). Employers contribute another 1%. The fund pays short-term benefits for unemployment, illness, and maternity leave.
How much tax do I pay on R500,000 or R1,000,000 in South Africa?
For the 2026/27 tax year, on R500,000 (no RA, under 65, no dependants): roughly R98,417 income tax and R2,125 UIF, leaving about R399,458 net. On R1,000,000 (same assumptions): roughly R288,293 income tax and R2,125 UIF, leaving about R709,582 net. Adding a medical scheme membership and/or RA contributions reduces the tax further. Use the calculator above for the exact figure.
How does a Retirement Annuity reduce my tax?
Retirement Annuity (RA) contributions are deductible up to the lesser of 27.5% of your taxable income or R350,000 per tax year. Contributing reduces your taxable income, which reduces both the marginal tax you pay and the average effective rate. This is one of the most powerful legal tax-reduction tools for individuals in South Africa.
What are SARS medical aid tax credits?
For the 2026/27 tax year the medical scheme fees tax credit is R376 per month for the main member, R376 per month for the first dependant, and R254 per month for each additional dependant. These credits reduce your tax bill directly (not your taxable income), so the value is the same regardless of your marginal rate.