What PAYE Is

PAYE is income tax that is deducted from your salary as you earn it, rather than in one lump sum at the end of the year. Your employer is legally required to calculate the tax on your pay, deduct it, and pay it over to SARS on your behalf each month. This spreads your tax across the year and means that, for most salaried workers, the bulk of their income tax is already paid by the time the tax year ends. It is the same income tax everyone pays — PAYE is simply the method of collecting it from people who earn a salary.

How Your Monthly Tax Is Worked Out

Your employer takes your monthly salary, works out what that is over a full year, and calculates the tax using South Africa’s progressive brackets — where each slice of income is taxed at its own rate, from 18% on the lowest band up to 45% on the highest. From that annual tax they subtract your age-based rebate, then divide what’s left by twelve to get the PAYE for the month. Because the calculation is based on your annual income, it automatically accounts for the fact that you never pay the top rate on your whole salary — only on the portion that falls in the top band.

The Rebate and the Tax-Free Threshold

Everyone gets a primary rebate of R17,820 a year, which is subtracted from the tax you owe — not from your income. This rebate is the reason there is a tax-free threshold: if you are under 65, the rebate fully cancels out the tax on income below R99,000 a year, so you pay no PAYE at all below that level. Taxpayers aged 65 and over get an extra rebate, and those 75 and older get another on top, which is why their tax-free thresholds are higher. The rebate is built into your monthly PAYE automatically — you do not need to claim it.

Why Your PAYE Can Change Month to Month

If your pay is the same every month, your PAYE usually is too. But several things can change it. A bonus or extra commission in one month pushes that month’s income higher, so more tax comes off. If you get a raise partway through the year, your employer recalculates your tax for the whole year and may adjust the monthly amount so the right total is paid by year-end — which can make one or two months look higher. And at the start of a new tax year in March, the brackets and rebates are usually updated following the February Budget, so your PAYE can shift slightly even if your salary has not.

PAYE and Your Tax Return

For many salaried people with a single employer and no other income, the PAYE deducted over the year is very close to the total tax they owe, and SARS may assess them automatically. Filing a return is still how SARS checks that the right amount was paid. If too much PAYE was deducted — often because of medical aid credits or retirement contributions that were not fully accounted for monthly — you may receive a refund. If too little was deducted, you may have an amount to pay. This is why your payslip deductions and your final tax position are related but not always identical.

Frequently Asked Questions

What does PAYE stand for?

Pay-As-You-Earn. It is income tax collected from your salary each month by your employer, rather than paid in one lump sum.

At what salary do I start paying PAYE?

If you are under 65, you pay no income tax on taxable income below R99,000 a year, because the primary rebate cancels it out. Above that, PAYE applies.

Why did my PAYE go up this month?

Usually because of a bonus or extra pay that month, or a raise that caused your employer to recalculate your tax for the year.

Is PAYE the same as UIF?

No. PAYE is income tax. UIF is a separate 1% contribution to the Unemployment Insurance Fund. Both come off your salary, but they are different things.

Related pages

• Net Pay Calculator
• Income Tax Tables
• UIF Calculator
• SASSA Grant Amounts

⚠️ This page is for informational purposes only and does not constitute legal or financial advice. KnowMyGovt is not affiliated with SARS nor the South African government. Always confirm current rates on the official SARS website.