SARS PAYE in South Africa (2026/2027) — EMP201, IRP5 & Bonus Tax Calculations
Pay As You Earn (PAYE) is the system by which employers in South Africa deduct employees' income tax from monthly remuneration and pay it to SARS on behalf of their employees. It is governed by the Fourth Schedule to the Income Tax Act 58 of 1962. Whether you are an employer managing payroll compliance or an employee checking your payslip — this guide covers everything you need.
What is PAYE (Pay As You Earn)?
Source: SARS — Pay As You Earn — sars.gov.za/types-of-tax/pay-as-you-earn/
Legislation: Fourth Schedule to the Income Tax Act 58 of 1962
- 1. PAYE is the employee's income tax — not a separate tax. It is simply the method of collection. The total PAYE paid over the year is credited against the employee's final income tax liability when they file their ITR12.
- 2. Employers are responsible, not employees — The employer is legally obligated to deduct PAYE and remit it to SARS. If PAYE is not deducted and paid, the employer is liable — not the employee.
- 3. PAYE is not final — At year-end, when an employee files their ITR12, their actual tax liability is calculated. If PAYE over-deducted: SARS issues a refund. If under-deducted (e.g., due to additional income): the employee pays the shortfall.
How PAYE is calculated on your salary
PAYE is calculated using the same income tax brackets and rates that apply to annual income tax. The employer annualises the employee's monthly earnings, calculates the annual tax liability, deducts applicable rebates, and then divides by 12 to get the monthly PAYE deduction.
Source: SARS — Guide for Employers in respect of Tax Deduction Tables (PAYE-GEN-01-G01)
The PAYE calculation — step by step
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1
Determine gross remuneration
Gross remuneration includes: basic salary, commission, bonuses, overtime pay, certain allowances, and the value of taxable fringe benefits. It does NOT include amounts excluded by the Fourth Schedule.
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2
Deduct allowable deductions from remuneration
The employer deducts certain employee contributions that reduce the amount subject to PAYE, including:
- Retirement fund contributions (pension, provident) — up to 27.5% of remuneration, capped at R430,000 per year (2026/2027)
- Medical scheme contributions (for the purposes of calculating the medical scheme fees tax credit — R376/month for member and first dependant; R254/month each additional dependant for 2026/2027) -
3
Annualise the taxable income
Multiply the monthly taxable remuneration by 12 to get the annual equivalent. SARS requires this so the correct progressive tax bracket is used.
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4
Apply the income tax bracket table
Calculate the annual tax using the 2026/2027 income tax brackets (published on sars.gov.za). See the income tax guide for the full bracket table.
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5
Deduct rebates
Subtract the primary rebate (R17,820 for 2026/2027), and if applicable, the secondary (age 65+: R9,765) and tertiary (age 75+: R3,249) rebates.
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6
Apply the medical scheme fees tax credit
Subtract the annual medical scheme fees tax credit from the annual tax calculated.
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7
Divide by 12
Divide the annual tax by 12 to get the monthly PAYE deduction. This is the amount the employer remits to SARS via EMP201.
| Item | Monthly | Annualised |
|---|---|---|
| Basic salary | R30,000 | R360,000 |
| Less: Pension fund contribution (10%) | (R3,000) | (R36,000) |
| Taxable remuneration | R27,000 | R324,000 |
| Tax on R324,000 (2026/2027 brackets) *R324,000 is in the 26% bracket |
R44,118 + 26% × (R324,000 − R245,100) = R44,118 + R20,514 = R64,632 |
|
| Less: Primary rebate | (R17,820) | |
| Less: Medical credit (member + 1 dep: R376 × 2 × 12) | (R9,024) | |
| Annual PAYE | R37,788 | |
| Monthly PAYE deduction | R3,149/month |
*Illustrative only. Actual PAYE depends on employee's full remuneration package, deductions, and age. Employers should use SARS tax deduction tables for accurate monthly deductions.
SARS publishes weekly, fortnightly, monthly, and annual tax deduction tables for 2026/2027. (No structural changes to the tables for 2026/2027)
Download from: sars.gov.za/tax-rates/employers/tax-deduction-tables/
Registering as an employer with SARS
Any business or individual who pays remuneration to employees must register with SARS for PAYE. Registration is required before the first payroll is run.
Who must register:
- Any employer who pays an employee remuneration above the monthly tax threshold (approximately R8,250/month for the 2026/2027 year — the monthly equivalent of the R99,000 annual threshold for under-65s)
- Even if only one employee earns above the threshold
- A director who draws a salary from their own company is both employer and employee for PAYE purposes
A single registration covers PAYE, SDL, and UIF. You register using the EMP101e form (available on SARS eFiling), and SARS issues separate reference numbers for each.
How to register (3 steps):
- Log in to SARS eFiling → navigate to your employer profile
- Complete the EMP101e (employer registration) form
- SARS processes the registration and issues PAYE, SDL, and UIF reference numbers
Employers with a total annual leviable amount of R500,000 or less are exempt from SDL. They still register for PAYE and UIF but not SDL.
Source: SARS SDL Guide (SDL-GEN-01-G01)
Source: SARS — Pay As You Earn
The EMP201 — your monthly PAYE declaration
The EMP201 is the monthly declaration form through which employers report and pay PAYE, UIF, SDL, and ETI (if applicable) to SARS. It is submitted via SARS eFiling and must be accompanied by the payment by the 7th of the month.
Source: SARS — Completing the Monthly Employer Declaration (EMP201)
What the EMP201 declares:
- Total PAYE deducted from all employees for the month
- Total UIF (employer 1% + employee 1% = 2% of remuneration)
- Total SDL (1% of leviable amount, if applicable)
- ETI claim (if applicable — reduces PAYE payable)
- A unique Payment Reference Number (PRN) links each payment to the correct EMP201
How to submit the EMP201 on eFiling:
- Log in to SARS eFiling using your employer profile
- Navigate to: Returns → Employer → Employment Tax → Monthly Employer Declaration (EMP201)
- Select the correct tax period (month and year)
- Enter PAYE, UIF, SDL, and ETI amounts from your payroll system
- Submit the return and make payment using the pre-populated PRN
A 10% penalty on the total declared amount is levied for late submission, plus interest on the outstanding amount.
Source: SARS — sars.gov.za/types-of-tax/pay-as-you-earn/
The EMP501 — employer reconciliation
Source: SARS — Reconciliations
| Period | Dates | What it covers |
|---|---|---|
| Annual EMP501 | 1 April – 31 May (each year) | Full tax year (1 March – 28 Feb); triggers IRP5 issue |
| Interim EMP501 | September – October (each year) | Mid-year reconciliation (1 March – 31 August) |
*The Annual EMP501 period for the 2025/2026 tax year was 1 April – 31 May 2026. The Interim EMP501 for the 2026/2027 year will run approximately September–October 2026.
What employers submit in the EMP501:
- All monthly EMP201 declarations for the period
- Employee tax certificates (IRP5/IT3[a]) for all employees
- Total payments made for PAYE, UIF, and SDL
How to submit:
- Employers with ≤50 employees: use SARS eFiling or e@syFile™ Employer v8.0 Current version
- Employers with >50 employees: use e@syFile™ Employer v8.0 (current version — updated March 2025)
Once the EMP501 is accepted by SARS, employers must issue IRP5/IT3(a) certificates to all employees. These certificates feed directly into SARS's auto-assessment and eFiling pre-population for the individual filing season.
PAYE on specific types of remuneration
PAYE applies to more than just basic salary. Bonuses, allowances, and fringe benefits are all subject to employees' tax — but each has specific rules for how they are taxed.
Bonuses
Bonuses are remuneration and are subject to PAYE. They are added to the employee's taxable income in the month they are paid and taxed at the applicable marginal rate.
Method: SARS allows a specific calculation method for annual bonuses to avoid an artificially high PAYE deduction in the bonus month. The employer annualises the expected annual remuneration including the bonus, calculates the tax, and apportions correctly.
Source: SARS Guide for Employers (PAYE-GEN-01-G01)
Travel allowances Budget 2026
PAYE must be deducted on 80% of a travel allowance paid by the employer. This is reduced to 20% if the employer is satisfied that at least 80% of the vehicle's use will be for business purposes.
From 1 March 2026, where an employer reimburses an employee at the prescribed rate (R4.95 per km), no PAYE applies on that reimbursement — the employee keeps a logbook to claim any deductible amount on assessment.
Source: SARS Budget 2026 FAQ; SARS PAYE-GEN-01-G03
Fringe benefits
Fringe benefits — such as a company car, housing benefit, subsidised meals, low-interest loans, and employer-provided assets — are taxable and must be included in the employee's remuneration for PAYE purposes.
The employer determines the "cash equivalent" of each fringe benefit (using SARS's prescribed methods) and adds it to the employee's monthly remuneration before calculating PAYE.
Source: SARS Guide for Employers (PAYE-GEN-01-G02)
Commission earners
Employees who earn mainly commission (where more than 50% of gross remuneration is commission) are allowed to deduct certain business expenses before PAYE is calculated. These deductions are reflected on the IRP5 and are subject to specific rules.
Source: SARS Guide for Employers (PAYE-GEN-01-G01)
Overtime and leave pay
Overtime and leave pay are both remuneration and are subject to PAYE at the employee's applicable rate. Leave pay on termination of employment is also taxable (it is not part of a severance benefit for tax purposes).
Source: SARS Guide for Employers for 2027 (PAYE-GEN-01-G20)
Employment Tax Incentive (ETI) — reduce your PAYE liability
The Employment Tax Incentive (ETI) is a PAYE incentive for employers who hire qualifying young employees. It reduces the employer's monthly PAYE liability — effectively allowing the employer to offset a portion of the employee's PAYE against the ETI benefit.
Source: SARS ETI section
Qualifying criteria (employee must meet all):
- Age 18–29 years old (no age limit for employees in Special Economic Zones)
- Earning below R7,500 per month (the monthly remuneration cap)
- Must be a South African citizen, permanent resident, or holder of asylum seeker permit
- Must not be a domestic worker or connected person to the employer
The ETI amount is calculated per qualifying employee and reduces the total PAYE amount declared on the EMP201. If the ETI claim exceeds the PAYE liability for the month, the excess is carried forward and may ultimately be refunded by SARS at reconciliation.
Your payslip, IRP5, and how to check your PAYE
Reading your payslip
Your payslip shows the PAYE your employer has deducted. The key line items to understand:
Common IRP5 source codes:
- 4102 = PAYE deducted for the year
- 3699 = total remuneration
- 4001/4003/4006 = retirement fund contributions (pension/provident/RA)
What is an IRP5 certificate?
The IRP5 is the employee's annual tax certificate issued by the employer after the EMP501 annual reconciliation (April–May each year). It summarises all remuneration received, PAYE deducted, UIF/SDL contributions, and medical aid contributions for the tax year.
When do you receive your IRP5?
IRP5 certificates are issued after the employer completes their annual EMP501 reconciliation (typically by 31 May each year for the 2025/2026 tax year). Most employers make IRP5s available electronically via your payroll system or HR portal.
What if your PAYE was incorrectly deducted?
If you believe your employer deducted too much or too little PAYE, the correct process is:
- Check your IRP5 — verify the figures match your payslip records
- Raise the discrepancy with your employer's payroll department first
- If not resolved, file your ITR12 with your correct income and deductions — SARS will recalculate and issue a refund (over-deduction) or a tax debt (under-deduction)
- If you believe the IRP5 is factually incorrect: contact SARS via eFiling with supporting documentation
PAYE compliance deadlines at a glance
| Obligation | Frequency | Deadline | Who |
|---|---|---|---|
| EMP201 submission + payment | Monthly | 7th of each month (last business day before if weekend/holiday) | All PAYE-registered employers |
| Interim EMP501 reconciliation | Bi-annual | September – October each year | All employers |
| Annual EMP501 reconciliation | Annual | 1 April – 31 May each year | All employers |
| Issue IRP5/IT3(a) to employees | Annual | After EMP501 is accepted (typically by end May) | All employers |
| PAYE deduction tables update | Annual | New tables apply from 1 March each year | All employers |
Source: SARS — sars.gov.za/types-of-tax/pay-as-you-earn/reconciliations/
The SARS tax deduction tables for 2026/2027 (1 March 2026 – 28 February 2027) reflect the updated income tax brackets (adjusted 3.4% for inflation). Employers must update payroll systems to use the new tables from 1 March 2026.