A tax rate can simply be defined as the percentage at which an individual or corporation is taxed. South Africa uses a progressive tax rate system. This means the percentage tax charged for individuals increases as their taxable income increases. Other countries apply a fixed rate to determine the relevant tax rate of each individual taxpayer.
How does this apply to me?
These are the tax rates for individuals for the 2023 tax year (March 2022 – 28 February 2023):
|Taxable Income Bracket||Rates of Tax|
|R1 – R226 000||18% of taxable income|
|R226 001 – R353 100||R40 680 + 26% of taxable income above R226 000|
|R353 101 – R488 700||R73 726 + 31% of taxable income above R353 100|
|R488701 – R641 400||R115 762 + 36% of taxable income above R488 700|
|R641 401 – R817 600||R170 734 + 39% of taxable income above R641 400|
|R817 601 – R1 731 600||R239 452 + 41% of taxable income above R817 600|
|R1 731 601 and above||R614 192 + 45% of taxable income above R1 731 600|
However, the effective tax rate of an individual is not the same as the rate of tax per tax bracket. This difference is shown in the following example:
|Taxable Income Bracket||Rate of Tax||Example: Taxable income||Amount over threshold||Tax on amount over threshold||Total tax payable||Effective tax rate|
|R1 – R226 000||18% of taxable income||R214 700||n/a||n/a||R38 646||18%|
|R226 001 – R353 100||R40 680 + 26% of taxable income above R226 000||R335 445||R109 445||R28 456||R69 136||20,6%|
|R353 101 – R488 700||R73 726 + 31% of taxable income above R353 100||R464 265||R111 165||R34 461||R108 187||23,3%|
|R488701 – R641 400||R115 762 + 36% of taxable income above R488 700||R609 330||R120 630||R43 427||R159 189||26,1%|
|R641 401 – R817 600||R170 734 + 39% of taxable income above R641 400||R750 000||R108 600||R42 354||R213 088||28,4%|
|R817 601 – R1 731 600||R239 452 + 41% of taxable income above R817 600||R1645 020||R827 420||R339 242||R578 694||35,2%|
|R1 731 601 and above||R614 192 + 45% of taxable income above R1 731 600||R1950 000||R218 400||R98 280||R712 472||36,5%|
This is then reduced by the applicable tax rebate:
- R16,425 for individuals younger than 65 years
- R25,425 for individuals between 65 and 75 years
- R28,442 for individuals 75 years and above.
Currently, the tax brackets have been adjusted to combat bracket creep, i.e. brackets are adjusted with inflation. So if a taxpayer receives an inflation-related adjustment to their salary, it’s unlikely that they’ll move from one tax bracket to another.
We’ve included an interactive excel spreadsheet for you to download. Here you can enter your taxable income to see how much tax you’ll be paying in 2023, before tax rebates.
How do I reduce my taxable income?
Contributions made by an individual to certain Regulation 28 retirement assets, such as a retirement annuity, pension or provident funds, can qualify as a deduction to reduce your taxable income. In such a scenario the deduction allowed in the year of assessment must not exceed:
- 27,5% of your remuneration∗ or taxable income (not including retirement lump sum benefit/withdrawal, and severance benefit) before any deduction for contributions
- The maximum allowed deduction of R350,000
* Remuneration is any amount of income which is paid/payable to any person whether in cash or otherwise (e.g. fringe benefit, bonus, overtime) and whether or not for services rendered. See SARS
Important due dates
SARS has announced the annual tax filing dates for the 2021 assessment year (1 March 2021–28 February 2022). For non-provisional taxpayers, the last day on which returns can be submitted is 24 October 2022. This is a month earlier than last year’s due date.
The filing season will open on 1 July 2022.
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.