How Income Tax Works in South Africa (2026 Guide)

1 What Is PAYE?

PAYE stands for Pay As You Earn. It's a system where your employer deducts income tax directly from your salary before you receive it. Instead of paying one large tax bill at year-end, tax is collected monthly as you earn.

PAYE is administered by the South African Revenue Service (SARS). Your employer calculates the amount based on your annual equivalent salary and the current tax tables.

Your payslip shows PAYE as a monthly deduction. If you want to see your exact PAYE amount, use our Tax Calculator

2 What Is Marginal Tax?

South Africa uses a progressive tax system. This means your income is taxed in layers, with each layer (bracket) taxed at a different rate. The rate applied to your highest portion of income is called your marginal tax rate.

Your marginal rate is 31% (the highest bracket your income reaches), but your effective rate — what you actually pay as a percentage of total income — is much lower (about 19.2% in this case).

3 2026/2027 Tax Brackets Overview

The following tax brackets apply for the tax year 1 March 2026 – 28 February 2027, as published by SARS:

Taxable Income (Annual)	Rate	Base Tax
R0 – R245,100	18%	R0
R245,101 – R383,100	26%	R44,118 + 26% above R245,100
R383,101 – R530,200	31%	R79,998 + 31% above R383,100
R530,201 – R695,800	36%	R125,599 + 36% above R530,200
R695,801 – R887,000	39%	R185,215 + 39% above R695,800
R887,001 – R1,878,600	41%	R259,783 + 41% above R887,000
R1,878,601 and above	45%	R666,339 + 45% above R1,878,600

A primary rebate of R17,820 is subtracted from the calculated tax for all taxpayers under 65. This effectively means you pay no tax on the first R99,000 of annual income.

For the full comparison between 2025 and 2026, read our 2025 vs 2026 tax comparison.

4 What Is UIF?

UIF stands for Unemployment Insurance Fund. It's a mandatory contribution that provides short-term financial relief if you lose your job, can't work due to illness, or go on maternity/paternity leave.

• Employee contribution: 1% of your monthly salary
• Employer contribution: An additional 1% (paid separately by your employer)
• Monthly cap: R177.12/month (based on the maximum insurable earnings ceiling)

UIF is managed by the Department of Employment and Labour. Benefits can be claimed for up to 238 days (roughly 34 weeks) depending on how long you've contributed.

5 Medical Tax Credits Explained

If you belong to a medical aid scheme, you receive monthly tax credits that directly reduce your PAYE. These are fixed amounts per month, not percentages:

Member	Monthly Credit (2026/2027)
Main member	R376
First dependant	R376
Each additional dependant	R254

Medical tax credits apply regardless of your income level. They are subtracted directly from your calculated tax, not from your taxable income. This makes them equally valuable to all taxpayers. The SARS medical credits schedule confirms these amounts.

6 How Salary Increases Affect Your Tax

When you receive a salary increase, the additional income is taxed at your marginal rate — the highest bracket your income falls into. This means a larger proportion of your raise goes to tax compared to your base salary.

The percentage you keep depends on your marginal rate. The higher your bracket, the less of each additional rand you keep.

7 Why Your Raise Feels Smaller Than Expected

When most people hear "R5,000 raise," they think "R5,000 more in my account." But that's never the case. Here's why:

1. Marginal taxation: The raise is taxed at your highest bracket rate, not your average rate
2. UIF still applies: Though capped, UIF is calculated on the higher salary
3. Lifestyle inflation: Higher income often triggers higher spending, masking the real gain
4. Bracket creep: If your raise pushes you into a new bracket, the portion above the threshold is taxed at the higher rate

The best way to see the real impact of a raise is to run both salary amounts through a calculator and compare the net take-home.