If you’re employed in South Africa, you’ve seen PAYE on your payslip every month. It’s usually the biggest deduction — and the least explained. Here’s what PAYE is, how it’s calculated, and why the number on your payslip might not match a simple annual calculation.
What PAYE is
PAYE (Pay As You Earn) is South Africa’s way of collecting income tax from employees as they earn it. Instead of a big tax bill at year-end, your employer estimates your annual tax from your monthly pay, withholds it, and pays it to SARS on your behalf every month — usually by the 7th of the following month.
Three important consequences follow from this design:
- PAYE is a prepayment, not a final assessment. The annual calculation includes your full taxable income, deductions and credits.
- You might get a refund. If your employer withheld too much — for example, because you didn’t claim medical aid credits monthly — SARS repays the difference after you file your annual return.
- You can be under-deducted. If your PAYE was too low (say, from a second job or untaxed income), you’ll owe SARS at assessment, possibly with interest.
How your monthly PAYE is calculated
Your employer does roughly this, every month:
- Annualise your monthly gross pay (multiply by 12).
- Subtract allowable deductions — most importantly, pension/provident fund contributions (deductible up to 27.5% of the greater of remuneration or taxable income, capped at R430,000 for 2026/27).
- Apply the SARS tax brackets to the result to get your annual tax.
- Subtract your tax rebates — the primary rebate of R17,820 for under-65s in 2026/27, plus extra rebates for 65+ and 75+.
- Divide by 12 to get your monthly PAYE.
The tax brackets (2026/27)
For the tax year 1 March 2026 to 28 February 2027, the brackets are:
| Taxable income (R) | Rates of tax |
|---|---|
| 1 – 245,100 | 18% of taxable income |
| 245,101 – 383,100 | R44,118 + 26% of taxable income above 245,100 |
| 383,101 – 530,200 | R79,998 + 31% of taxable income above 383,100 |
| 530,201 – 695,800 | R125,599 + 36% of taxable income above 530,200 |
| 695,801 – 887,000 | R185,215 + 39% of taxable income above 695,800 |
| 887,001 – 1,878,600 | R259,783 + 41% of taxable income above 887,000 |
| 1,878,601 and above | R666,339 + 45% of taxable income above 1,878,600 |
Important: these are marginal brackets. If you earn R300,000, only the amount above R245,100 is taxed at 26% — the first R245,100 is still taxed at 18%. Your effective rate will always be lower than your marginal rate.
A worked example
Let’s calculate PAYE for a salary of R25,000 per month, with no pension contribution, for someone under 65:
- Annualise: R25,000 × 12 = R300,000.
- Deductions: none in this example, so taxable income is R300,000.
- Bracket tax: 18% of the first R245,100 (R44,118) + 26% of the remaining R54,900 (R14,274) = R58,392.
- Minus rebates: R58,392 − R17,820 primary rebate = R40,572.
- Monthly PAYE: R40,572 ÷ 12 = R3,381.
Add UIF of 1% (capped at R177.12) and your take-home is about R21,441. Try your own figures in the PAYE calculator — it does all five steps instantly.
Rebates
Rebates are subtracted from your tax, not your income:
- Primary: R17,820 (all qualifying individuals, including those aged 65 and older)
- Secondary: R9,765 extra (65 and older)
- Tertiary: R3,249 extra (75 and older)
Because the primary rebate is R17,820 and the first bracket is 18%, it cancels out tax on the first R99,000 of taxable income. That’s the tax-free threshold for under-65s (R153,250 for 65–74, R171,300 for 75+). Earn below it and your PAYE is zero.
Why PAYE on your payslip can be adjusted
Your employer may deduct more or less than the standard calculation if:
- you have a tax directive from SARS (e.g. for additional tax, or because your earnings are partly untaxed),
- you belong to a medical aid — the monthly tax credit (R376 for the main member and first dependant in 2026/27, plus R254 for each additional dependant) reduces the PAYE withheld,
- you earn commission, irregular income, or a bonus — payroll annualises and averages these,
- you work for more than one employer and need to discuss additional withholding; a directive is not automatically issued merely because you have two jobs, or
- you started or left a job mid-month.
Some differences concern withholding timing; eligible medical credits, deductions and total income also affect final liability. Reconcile both the underlying entitlement and the PAYE already paid.
At year-end
At the end of the tax year your employer gives you an IRP5/IT3(a) certificate summarising your earnings and deductions. When you file your annual return (via SARS eFiling, usually from July), SARS reconciles the PAYE you paid against your actual liability:
- paid too much → you get a refund;
- paid too little → you owe the balance (interest may apply).
That’s why it’s worth keeping your details current — if your salary changes, medical aid status or bank account details change, tell your employer so your monthly PAYE stays accurate.
Where PAYE fits with UIF
PAYE and UIF are often confused because both appear on every payslip, but they’re different systems. PAYE is income tax collected by SARS; UIF is a 1% insurance contribution (capped at R177.12 per month in 2026/27) that funds unemployment, illness and maternity benefits. UIF is not tax — you don’t get it back at year-end, and it’s not refundable. See PAYE vs UIF for the full comparison.
Where to verify
- SARS — Rates of tax for individuals — official brackets, rebates and thresholds.
- SARS — Employers and PAYE — how PAYE is collected.
- Your employer’s payroll department — for anything specific to your contract.
Try the PAYE calculator to see your estimated monthly tax. Use the tables for the tax year covering your pay date: the individual tax year normally runs from March to the following February.