IN A NUTSHELL Most of us know that we pay tax when we earn income. But how tax is worked out can feel confusing. Once you understand the two basic ideas that guide our tax system – tax thresholds and tax rates – everything else starts to make sense.
South Africa uses a progressive tax system. This means that people who earn less pay a lower percentage of tax, and people who earn more pay a higher rate.
Tax is worked out per year. In South Africa, the tax year runs from 1 March to 28 or 29 February the following year.
If you have a job, your employer usually deducts PAYE (Pay As You Earn) each month. This means you don’t pay all your taxes once a year — instead, you pay them in small parts each month.
1 Tax rates
Tax is not charged at a single rate on your income, but in tiers. Tax brackets are income ranges that are taxed at different rates. South Africa’s first tax bracket charges 18% on the first portion of your taxable income, up to R237 100.
2 Tax thresholds
The South African Revenue Service (SARS) gives everyone a tax-free amount. All South Africans under 65 do not pay tax on the first R95 750 they earn – this is called a tax threshold. The tax threshold doesn’t reduce your income — it reduces the tax you must pay.
In tax speak, we say that SARS gives you a tax rebate on the first R95 750 you earn – it’s like a tax discount. This rebate ensures that people below the threshold pay zero tax.
SARS works out your tax using the tax brackets and then applies a rebate. The first tax bracket is 18%.
R95 7650 x 18% = R17 235
Any tax amount equal to or lower than R17 235 is reduced to zero. Let’s look at our friends and the impact of the tax rebate on their tax situation.
Tax starts simple. It becomes more complicated as your income increases, or when you have more than one source of income, such as a job, a side hustle, and/or rental income. But once you understand tax rates and tax thresholds, you have the basics.
The examples above were calculated on the 2025–2026 tax rates.
Further reading
It’s February: Make the most of your tax benefits
Sources
Rates of Tax for Individuals
