If you earn income that isn't taxed through PAYE — like business profit, rental income or freelance work — SARS expects you to pay provisional tax. It's not a separate tax; it's just paying your income tax in advance, in instalments, instead of one big bill at assessment.
Who is a provisional taxpayer?
You're a provisional taxpayer if you earn income other than a salary — most commonly:
- Sole proprietors and freelancers
- Companies (every registered company is automatically provisional)
- People with significant rental, interest or investment income
If your only income is a salary with PAYE deducted, you generally aren't provisional.
The two (sometimes three) payments
Provisional tax is paid in two compulsory instalments per year, based on your estimated taxable income:
- First payment — due at the end of the sixth month of your tax year (for a February year-end, that's 31 August). You pay roughly half your estimated annual tax.
- Second payment — due on the last day of the tax year (28/29 February). You top up to your full estimated tax for the year.
- Third (voluntary) payment — an optional top-up by the end of September, to avoid interest if you underestimated.
You declare these on an IRP6 return.
How the estimate works
Your provisional tax is the income tax on your estimated taxable income for the year, less any PAYE already paid and rebates. Companies use the 27% rate (or SBC/turnover rates if they qualify); individuals use the sliding scale. You can estimate your figure with our Small Business Tax Calculator or Salary Tax Calculator.
The penalties (this is the important part)
SARS penalises under-estimation and late payment:
- Late payment: 10% penalty plus interest.
- Under-estimation: if your second-payment estimate is too low (below 80% of actual for higher earners, or less than the "basic amount"), you can face a 20% under-estimation penalty.
The safest approach is to base your estimate on your latest assessment ("basic amount") and top up if you've had a good year.
Don't get caught out
Provisional tax trips up a lot of business owners because it's easy to forget the August deadline and easy to under-estimate. 360books tracks your taxable income as you go and flags provisional deadlines on your compliance calendar — so you pay the right amount, on time, and skip the penalties.