What is PAYE?
PAYE (Pay As You Earn) is the income tax that employers deduct from employees' salaries and pay over to SARS every month. As an employer, you are legally required to register for PAYE if any employee earns above the tax threshold — R95,750 per year for the 2026/2027 tax year.
Getting PAYE wrong is one of the most common compliance failures for South African small businesses. Underpaying means penalties and interest from SARS; overpaying means unhappy employees.
2026/2027 Tax Brackets (1 March 2026 – 28 February 2027)
| Taxable Income | Rate |
|---|---|
| R1 – R237,100 | 18% |
| R237,101 – R370,500 | R42,678 + 26% above R237,100 |
| R370,501 – R512,800 | R77,362 + 31% above R370,500 |
| R512,801 – R673,000 | R121,475 + 36% above R512,800 |
| R673,001 – R857,900 | R179,147 + 39% above R673,000 |
| R857,901 – R1,817,000 | R251,258 + 41% above R857,900 |
| R1,817,001 and above | R644,489 + 45% above R1,817,000 |
Tax Rebates
Rebates reduce the actual tax payable (not just the taxable income):
| Rebate | Amount |
|---|---|
| Primary (all taxpayers) | R17,235 |
| Secondary (65 years and older) | R9,444 |
| Tertiary (75 years and older) | R3,145 |
Tax Thresholds
If an employee earns below these thresholds, no PAYE is payable:
| Age | Threshold |
|---|---|
| Under 65 | R95,750 |
| 65 – 74 | R148,217 |
| 75 and over | R165,689 |
Worked Example
Employee: Sarah, 32 years old, monthly salary R28,000 (R336,000 per year)
Step 1 — Annual taxable income: R336,000
Step 2 — Calculate annual tax from brackets:
- Tax on first R237,100: R42,678
- Tax on remaining R98,900 at 26%: R25,714
- Total annual tax: R68,392
Step 3 — Subtract primary rebate:
- R68,392 − R17,235 = R51,157
Step 4 — Monthly PAYE:
- R51,157 ÷ 12 = R4,263/month
So Sarah's net monthly pay = R28,000 − R4,263 = R23,737
UIF and SDL — Don't Forget These
PAYE is not the only deduction:
UIF (Unemployment Insurance Fund):
- Employee contributes: 1% of gross salary (capped at R177.12/month based on ceiling of R17,712)
- Employer contributes: 1% of gross salary (also capped)
- Both are submitted monthly alongside PAYE on the EMP201 return
SDL (Skills Development Levy):
- Employer-only contribution: 1% of total payroll
- Only applies to businesses with a total annual payroll over R500,000
- Also submitted on the EMP201 return
When is PAYE Due?
PAYE, UIF and SDL must be paid to SARS by the 7th of the following month (or the last business day before the 7th if it falls on a weekend or public holiday).
The EMP201 return must be submitted online via eFiling at the same time.
Late payments attract:
- 10% penalty on the amount outstanding
- Interest at the prescribed rate (currently around 11.25% per annum)
Medical Aid Credits
If employees contribute to a registered medical scheme, they receive a monthly tax credit that reduces PAYE:
| Beneficiaries | Monthly Credit |
|---|---|
| Main member | R364 |
| First dependant | R364 |
| Each additional dependant | R246 |
So an employee with a spouse and two children on medical aid gets a credit of R364 + R364 + R246 + R246 = R1,220/month off their PAYE.
How SNSBooks Handles This Automatically
Manually calculating PAYE every month is time-consuming and error-prone. SNSBooks stores the current tax year brackets, rebates, thresholds, UIF rates and medical aid credits in the system. When you approve a payroll run:
1. The system calculates PAYE, UIF and SDL for each employee
2. Payslips are generated and emailed (password-protected PDF)
3. The payroll journal is posted automatically (debit salaries expense, credit PAYE/UIF/SDL payable)
4. The EMP201 preparation report is ready to submit to SARS
No spreadsheets. No manual bracket lookups. No risk of using last year's rates.