If you belong to a medical scheme, your employer likely applies a medical aid tax credit (MTC) to reduce the PAYE they withhold from you each month. It’s the most common reason your payslip PAYE is lower than a raw tax-bracket calculation — and, if you’re on a plan where the employer doesn’t apply it monthly, it’s also the most common source of an unexpected refund at year-end.
A credit is not a deduction
The distinction is the whole game:
- A deduction (like a pension contribution) reduces your taxable income before tax is calculated.
- A credit reduces the tax itself, rand for rand, after it’s calculated.
For example, R376 of qualifying credit reduces tax by up to R376, whereas a R376 deduction reduces taxable income. The credit is non-refundable: it cannot reduce normal tax below zero.
There are two different things with similar names, and confusing them causes errors:
- Medical scheme fees tax credit (MTC) — a monthly tax rebate for qualifying scheme contributions, limited by the normal tax payable.
- Additional medical expenses tax credit — a credit for qualifying out-of-pocket medical expenses, calculated against your income. Most employees never claim this because their expenses don’t cross the threshold.
The MTC amounts for 2026/27
For the 2026/27 tax year (1 March 2026 – 28 February 2027):
| Who | Monthly credit |
|---|---|
| Main member | R376 |
| First dependant | R376 |
| Each additional dependant | R254 |
So a member with a spouse and two children gets R376 + R376 + R254 + R254 = R1,260 per month, or R15,120 for the year.
These amounts are fixed by SARS each year and don’t depend on how much your medical aid costs. Whether your scheme costs R800 a month or R8,000, the credit is the same.
How it appears on your payslip
Your employer usually applies the MTC monthly, which lowers the PAYE line. That means your take-home pay is higher than a simple “gross − tax − UIF” estimate would suggest.
If payroll did not apply an eligible credit, reconcile the contributions and covered months on your annual return. A refund may result if tax was overpaid; scheme membership does not guarantee a refund.
Why the credit can leave you owing SARS
If your covered dependant count or contribution months change, payroll’s credit may no longer match your entitlement. Downgrading a plan alone does not change the fixed credit where eligible membership and dependant counts remain the same. Reconcile the months against the scheme certificate.
For a fictional example, suppose an additional dependant leaves the scheme in September but payroll continues an extra R254 credit for six months. That creates a R1,524 difference to investigate. Do not assume that a birthday alone ends scheme membership: check the actual certificate and qualifying contributions.
What to do
- Check your payslip monthly for the medical aid credit line and confirm the dependant count is still right.
- Tell payroll immediately when your dependants change — don’t wait for year-end.
- Keep your scheme’s tax certificate, which your medical aid issues annually and which states exactly who was covered and for which months.
Where to verify
- SARS — Medical tax credits — eligibility and non-refundable treatment; check the linked annual rates for your assessment year.
- Your medical scheme’s annual tax certificate — proof of membership and dependants.
For context, read what is PAYE? and how to read your IRP5, or use the PAYE calculator to see how a medical credit changes take-home pay.