How to Calculate PAYE in South Africa: 2026/2027 Guide

How to Calculate PAYE in South Africa: 2026/2027 Guide

If you employ staff in South Africa, understanding Pay As You Earn (PAYE) is essential for managing payroll correctly. PAYE is the employees' income tax that an employer deducts from remuneration and pays to the South African Revenue Service (SARS).

The 2026/2027 tax year runs from 1 March 2026 to 28 February 2027. It is important to use the correct tax brackets, rebates and thresholds when calculating employees' tax.

In this guide, we explain how PAYE works, provide the current SARS tax tables, and walk through a practical salary calculation.

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What Is PAYE in South Africa?

PAYE stands for Pay As You Earn. It is the system through which employers deduct employees' income tax from their remuneration and pay it to SARS.

Instead of paying all their employment income tax at the end of the tax year, employees generally have tax deducted throughout the year.

Employers must calculate and deduct the appropriate employees' tax, maintain payroll records and meet their applicable SARS payment and reporting obligations.

PAYE is different from UIF and the Skills Development Levy (SDL). Each has its own rules and calculation requirements.

What Is the 2026/2027 Tax Year?

The South African 2026/2027 tax year runs from:

• Start date: 1 March 2026
• End date: 28 February 2027

Always use the tax tables applicable to the relevant tax year. Using outdated rates can result in incorrect payroll deductions.

For the official tax tables, visit the SARS Rates of Tax for Individuals page.

SARS Income Tax Brackets for 2026/2027

South Africa uses a progressive income tax system. Different portions of your annual taxable income are taxed at different rates.

The following rates apply to individuals for the 2026/2027 tax year.

Annual taxable income	Tax calculation
R1 – R245,100	18% of taxable income
R245,101 – R383,100	R44,118 + 26% of income above R245,100
R383,101 – R530,200	R79,998 + 31% of income above R383,100
R530,201 – R695,800	R125,599 + 36% of income above R530,200
R695,801 – R887,000	R185,215 + 39% of income above R695,800
R887,001 – R1,878,600	R259,783 + 41% of income above R887,000
R1,878,601 and above	R666,339 + 45% of income above R1,878,600

Source: Official SARS individual income tax rates.

Does a Higher Tax Bracket Mean Your Entire Salary Is Taxed at a Higher Rate?

No. This is one of the most common misunderstandings about South African income tax.

The tax system is progressive, which means the applicable rates apply to different portions of taxable income.

For example, an employee whose income falls into the 26% bracket does not pay 26% on every rand earned. The calculation includes the tax applicable to the lower bracket plus tax on the portion above that bracket's threshold.

This is why calculating PAYE using a single percentage of gross salary can produce an incorrect result.

Tax Rebates for 2026/2027

A tax rebate reduces the amount of income tax payable.

The applicable annual individual tax rebates for the 2026/2027 tax year are:

Rebate	Annual amount
Primary rebate	R17,820
Secondary rebate (age 65 and older)	R9,765
Tertiary rebate (age 75 and older)	R3,249

The primary rebate generally applies to qualifying individual taxpayers. Additional rebates depend on the taxpayer's age.

For example, an eligible individual younger than 65 generally qualifies for the primary rebate of R17,820.

A qualifying individual aged 65 or older may also receive the secondary rebate, while a qualifying individual aged 75 or older may receive the tertiary rebate.

These rebates are important because they reduce the tax calculated using the applicable tax brackets.

Income Tax Thresholds for 2026/2027

The income tax threshold is the annual income level below which an individual generally does not pay normal income tax after the applicable rebate.

The thresholds for the 2026/2027 tax year are:

Age group	Annual tax threshold
Younger than 65	R99,000
Age 65 to below 75	R153,250
Age 75 and older	R171,300

For example, an individual younger than 65 earning R8,000 per month has an annual salary of R96,000.

If this is their only relevant income and the standard assumptions apply, the salary is below the R99,000 annual threshold.

However, other income and individual circumstances can affect the tax position. Employers should apply the relevant SARS rules rather than relying on salary alone in every situation.

How to Calculate PAYE Step by Step

A simplified annual income tax calculation generally follows these steps:

1. Determine the employee's annual taxable income.
2. Identify the applicable SARS tax bracket.
3. Calculate the tax using the formula for that bracket.
4. Subtract the applicable annual tax rebate.
5. Account for applicable tax credits, deductions and other adjustments where permitted.
6. Apply the appropriate SARS employees' tax calculation method to determine the PAYE deduction for the relevant payroll period.

For monthly employees, the actual calculation must follow the applicable SARS rules for remuneration and employees' tax.

Let's look at a practical example.

Worked Example: PAYE on a R30,000 Monthly Salary

Consider an employee with the following circumstances:

• Monthly gross salary: R30,000
• Annual taxable salary: R360,000
• Age: Younger than 65
• Applicable rebate: Primary rebate
• Other income and adjustments: None assumed for this illustration

This example demonstrates the annual tax calculation and its monthly equivalent. It is not a substitute for the prescribed SARS payroll calculation.

Step 1: Calculate Annual Income

Monthly salary multiplied by 12 months:

R30,000 × 12 = R360,000

The employee's assumed annual taxable income is R360,000.

Step 2: Identify the Tax Bracket

Annual taxable income of R360,000 falls within the R245,101 to R383,100 tax bracket.

The formula for this bracket is:

R44,118 + 26% of taxable income above R245,100.

Step 3: Calculate Tax Before the Rebate

First, calculate the income above R245,100:

R360,000 − R245,100 = R114,900

Calculate 26% of this amount:

R114,900 × 26% = R29,874

Add the base tax for this bracket:

R44,118 + R29,874 = R73,992

The annual tax before the rebate is R73,992.

Step 4: Subtract the Primary Rebate

Subtract the annual primary rebate of R17,820:

R73,992 − R17,820 = R56,172

The illustrative annual tax after the primary rebate is R56,172.

Step 5: Calculate the Monthly Equivalent

Divide the annual amount by 12:

R56,172 ÷ 12 = R4,681

Under these assumptions, the illustrative monthly equivalent is R4,681.

Important: This is an educational annualised calculation, not a guaranteed PAYE deduction. Actual payroll deductions can differ because of the prescribed SARS calculation method, remuneration components, retirement contributions, medical scheme tax credits and other applicable circumstances.

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PAYE, UIF and SDL: What Is the Difference?

PAYE is only one part of payroll administration in South Africa.

PAYE: Pay As You Earn

PAYE is employees' income tax deducted from remuneration by the employer and paid to SARS.

The amount depends on the employee's taxable remuneration, applicable tax rates, rebates and other relevant circumstances.

UIF: Unemployment Insurance Fund

UIF provides qualifying workers with access to certain benefits under the applicable legislation.

Contributions are generally calculated at 1% of the employee's remuneration from the employee and 1% from the employer, subject to the applicable contribution ceiling and exclusions.

Employers must follow the current UIF contribution rules.

SDL: Skills Development Levy

SDL is an employer levy generally calculated at 1% of leviable remuneration for employers who meet the applicable requirements.

Employers with an annual payroll of R500,000 or less are generally exempt, subject to the applicable rules.

PAYE, UIF and SDL are separate payroll items. They should not be treated as interchangeable deductions.

For current requirements, consult the SARS tax rates and guidance.

Common PAYE Mistakes Employers Should Avoid

Payroll mistakes can create unnecessary administration and potential compliance problems.

Here are some common issues to avoid:

• Using tax tables from a previous financial year.
• Applying a marginal tax rate to the employee's entire salary.
• Forgetting to account for applicable tax rebates.
• Confusing PAYE with UIF contributions.
• Overlooking taxable benefits or variable remuneration.
• Failing to maintain accurate employee and payroll records.
• Missing applicable SARS payment or filing deadlines.
• Assuming that two employees with the same gross salary will always have identical PAYE deductions.

Using current tax information and maintaining consistent payroll procedures can help businesses reduce these risks.

How Payroll Software Can Help Your Business

As your business grows, payroll administration can become increasingly complex.

A suitable payroll system can help you organise employee information, manage recurring payroll tasks and generate payslips more efficiently.

Instead of relying entirely on spreadsheets and repetitive manual work, you can use payroll software to bring important payroll processes together.

When choosing a payroll solution, consider:

• Whether it supports South African payroll requirements.
• Whether payroll calculations use the applicable tax tables.
• Whether it can generate professional payslips.
• Whether employee information can be managed conveniently.
• Whether the pricing is appropriate for your business size.
• Whether the system provides the features and support your business needs.

For small businesses, affordability and ease of use can be just as important as functionality.

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Frequently Asked Questions About PAYE

What Does PAYE Stand For in South Africa?

PAYE stands for Pay As You Earn. It is the system employers use to deduct employees' income tax from remuneration and pay it to SARS.

What Are the PAYE Tax Brackets for 2026/2027?

Individual income tax rates range from 18% to 45%, depending on annual taxable income. The applicable rates are applied progressively using the SARS tax table.

What Is the Tax-Free Threshold for Someone Younger Than 65?

For the 2026/2027 tax year, the annual income tax threshold for an individual younger than 65 is R99,000, subject to the applicable rules and circumstances.

Is UIF Included in PAYE?

No. PAYE and UIF are separate payroll items. An employee's payslip may show both deductions, depending on the applicable circumstances.

Can Payroll Software Calculate PAYE Automatically?

Payroll software can automate payroll calculations when configured with the correct tax tables, employee information and remuneration details.

Employers should ensure their software is updated for the correct tax year and that payroll calculations are reviewed appropriately.

Where Can I Find the Official SARS Tax Tables?

You can find the official tax rates, rebates and thresholds on the SARS Rates of Tax for Individuals page.

Employers can also consult the SARS Guide for Employers in Respect of Employees' Tax.

Where Can I Find Affordable Payroll Software in South Africa?

If you are looking for an affordable payroll solution, visit Kiboko Payroll to explore its features and pricing.

Your first month is free, making it easier to try the platform and decide whether it meets your business needs.

Final Thoughts

Understanding PAYE is essential for employers who want to manage payroll correctly in South Africa.

By using the right tax tables, accounting for applicable rebates and maintaining accurate employee records, businesses can improve their payroll processes and reduce avoidable errors.

If you want to spend less time on repetitive payroll administration, explore a solution designed for South African businesses.

Visit Kiboko Payroll today and start your first month free.

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Disclaimer: This article is for general educational purposes only and does not constitute tax, legal or accounting advice. Tax calculations depend on individual circumstances and applicable legislation. Always consult current SARS guidance or a qualified tax practitioner when determining the correct PAYE deduction for an employee.