Before we get down to the questions and answers, let’s just make sure we’re all on the same page. When we talk about PAYE, we are talking about the Pay As You Earn system, whereby your employer withholds your income tax amount and pays it directly to SARS on your behalf, every month.
PAYE is the amount of income tax that is deducted from your salary before you receive it. This system ensures that you don’t have to pay SARS between 18% and 45% of your earnings in a yearly lump sum. That’s good news.
Your employer will pay your portion every month directly to SARS according to each employees’ tax rates. These rates are calculated based on your basic salary, bonuses, benefits like a pension fund, medical aid, and other allowances.
Now, let’s get down to the Q&As on ‘what is PAYE’?
How do you get started?
Your employer, who is registered or required to register with SARS for PAYE, will pay the amount you owe to SARS by deducting the amount from your salary each month and paying it directly to SARS. Besides supplying your Employer with your personal details and income tax number, there is nothing else you will need to do. If you don’t have an income tax number, your employer can register you for one via their e-Filing. It’s essential that all your details submitted are accurate and current (especially your banking details) for any possible refund and to make sure your IRP5 is correct.
Who is it for?
The amounts deducted or withheld must be paid by the employer to SARS by completing the Monthly Employer Declaration called an EMP201. This declaration is a payment return in which the employer declares the total payment together with the allocations for PAYE, SDL, UIF and/or Employment Tax Incentive, if applicable. These amounts then need to be submitted twice a year to SARS via an Employer Reconciliation Declaration (EMP501) which is the return that generates your IRP5.
How and when should it be paid?
PAYE must be paid to SARS by the 7th of the following month for the salary that is being declared. If the 7th of the month falls on a public holiday or weekend, the payment must be made on the last business day prior to it.
The following payment methods are available:
- eFiling – for the payment to be authorized Bia the employer’s bank account
- Electronic payments (EFT), using the correct reference number to allocate the payment to the correct period
- Payments at a bank: All payments can be made at any ABSA, Capitec, FNB, Nedbank, or Standard Bank branch.
How much will you pay?
The minimum percentage you will pay in tax is 18% of your taxable income. This is for individuals earning up to R216 200 per year. The subsequent tax bracket up to R337 800 requires a payment of R38 916 plus 26% for taxable income above R216 200, and it keeps going up from there. To view the 2022 tax table, click here.
How is PAYE calculated if you’re self-employed?
If you are self-employed and earn taxable income above the annual threshold of R79 000 for the current tax year, you must register as a provisional taxpayer. This involves twice-yearly provisional payments, and it is highly recommended that you have the cash available to pay these two lump-sum payments in August and February each year. Provisional taxpayers receive income other than a salary or remuneration from an employer—individuals who run their own businesses, such as freelancers, sole proprietors, and independent contractors. Commission earners and freelance artists can apply for a Tax Directive for a lower tax percentage rate.
Consider the experts
Dirmeik Consulting has an extensive understanding of tax and PAYE laws and can give the correct and up to date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.
Dirmeik’s tax experts can help you to lower your tax liability and will endeavor to create the best solution for you and your business. Get in touch with us on our website.