PAYE (Pay-As-You-Earn) is income tax your employer deducts from your salary each month and pays to SARS on your behalf. It is not a separate tax — it is your income tax, collected in instalments.
Step 1: Annualise your income
Payroll systems work out what you would earn over the full tax year. For the 2027 tax year (1 March 2026 – 28 February 2027), a salary of R30 000 a month is treated as R360 000 a year.
Step 2: Subtract deductions
Your own contributions to a pension fund, provident fund or retirement annuity are deductible up to 27.5% of your income, capped at R430 000 a year from 2027 (up from R350 000). Every rand you contribute within the limit reduces your taxable income.
Step 3: Apply the tax table
South Africa uses progressive brackets. For 2027, the first R245 100 of taxable income is taxed at 18%, the next band at 26%, then 31%, 36%, 39%, 41% and finally 45% above R1 878 600. Each rate applies only to the part of your income inside its band — so moving into a higher bracket never reduces your take-home pay.
On R360 000, the table gives R44 118 plus 26% of the R114 900 above R245 100 — R73 992.
Step 4: Subtract rebates
Everyone receives the primary rebate of R17 820 (2027). If you are 65 or older you also get the secondary rebate (R9 765), and from 75 the tertiary rebate (R3 249). This is why the first R99 000 of income is effectively tax-free for people under 65.
R73 992 − R17 820 = R56 172 a year, or R4 681 a month.
Step 5: Subtract medical tax credits
If you pay for medical aid, you receive a monthly credit of R376 for yourself, R376 for your first dependant and R254 for each additional dependant. For a family of three that is R1 006 a month off your tax.
What about bonuses?
A bonus increases your income for the year, so it is taxed at your marginal rate. Most payrolls deduct the extra tax in the month the bonus is paid, which is why your December payslip can look heavily taxed.
Why your payslip may differ slightly
Payroll calculates PAYE on the exact amounts paid each month, including allowances and fringe benefits, and may average or annualise in slightly different ways. Over- or under-deductions are settled when you file your annual tax return.
Try it with your own numbers in the SARS income tax calculator.