How much tax should you pay on your salary?

South Africa has a resident-based tax system which means that all residents are charged for tax on their worldwide income and nonresidents are charged on their income earned in South Africa. The South African tax code has got relevant provisions to avoid the double taxation of income.

Salaried persons form a separate class of taxpayers in any tax regime and the case is same for South Africa, each year the South African Revenue Service (SARS) issues the tax rates for salaried individuals.

 The tax rates for the period 1st March 2020 - 28 February 2021 are as follows

​Taxable income (R)	​Rates of tax (R)
1 – 205,900	18% of taxable income
205,901 – 321,600	37,062 + 26% of taxable income above 205,900
321,601 – 445,100	67,144 + 31% of taxable income above 321,600
445,101 – 584,200	105,429 + 36% of taxable income above 445,100
584,201 – 744,800	155,505 + 39% of taxable income above 584,200
744,801 – 1,577,300	218,139 + 41% of taxable income above 744,800
1,577,301 and above	559,464 + 45% of taxable income above 1,577,300

 

The tax regime in South Africa is progressive, like other countries which means that the tax rate increases as the taxable income increases. There are 7 tax slabs with increasing rates of taxes. In addition to this there are also age-based tax thresholds

Age	Threshold
Under 65	R 83,100
65 and older	R 128,650
75 and older	R 148,850

 

These slabs indicate the percentage of tax that should be paid by any individual. If we look at individuals under the age of 65 then we can see that anyone earning taxable income below R 205,900 will be charged on 18% of their taxable income. So, for instance if an individual is earning R 100,000 annually, then they will be charged on their taxable income at the rate 18% and the tax payable for the year would be R 18,000.

However, if an individual has annual taxable income of R 300,000 for instance then they will be charged at a higher rate because their annual taxable income corresponds to the second slab. Such an individual will be required to pay

 

Taxable Income	R300,000
Tax Slab	37,062 + 26% of taxable income above 205,900
Calculation	Salary above 205,900 = 300,000 - 205,900 = 94100 26% of 94100 = 24,466 37,062 + 24,466 = 61528
Tax Payable

 

The tax can be calculated in a similar manner for other tax slabs as well. If we look at the tax slabs, then 45% is roughly the highest percentage that SARS charges for the highest taxable income slab. It must however be noted that the tax calculation done above is very simplistic without accounting for deductions such as provident fund, pension and other allowances, credits and rebates.

It should be remembered that these slabs are for taxable income and not gross income. Therefore it is possible for a person to have gross income that may be in the third slab but after accounting for deductions their taxable income may fall in the second slab, in such a case they will be treated as a person earning income that falls under the second slab.  

How much tax you need to pay on your salary can therefore be calculated quite easily if you are well versed in tax matters, if however you are not then you can use the services of a professional tax accountant.