Complete PAYE Guide
Complete PAYE Guide South Africa 2026
Last Updated: June 2026 | Reading Time: 18 minutes
Everything about PAYE tax in South Africa. How PAYE is calculated, employer responsibilities, and what employees need to know about PAYE deductions.
Table of Contents
Quick Answer
PAYE (Pay As You Earn) is the system where employers deduct income tax from employees’ salaries each month and pay it to SARS. The amount is calculated using SARS tax tables based on your gross remuneration, including salary, bonuses, and fringe benefits. Employers must submit monthly EMP201 declarations by the 7th of each month and complete EMP501 reconciliations in October and May.
What Is PAYE?
PAYE is South Africa’s primary method of collecting income tax from employed individuals. Introduced to spread tax payments throughout the year, it reduces the burden of a large year-end tax bill and ensures consistent revenue collection for the government.
When you receive your payslip, the PAYE deduction is usually the largest deduction after UIF. Your employer calculates this amount using SARS monthly tax deduction tables and pays it directly to SARS.
How PAYE Is Calculated
The Calculation Process
- Determine your gross income for the month (salary + bonuses + allowances + fringe benefits)
- Annualise the monthly amount (multiply by 12) to estimate annual income
- Apply the annual tax tables to calculate estimated annual tax
- Divide by 12 to get monthly PAYE
- Subtract medical tax credits (if applicable)
- Add additional PAYE for any extra income processed in that month
Example Calculation
Scenario: Thabo earns R35,000 per month base salary with no additional benefits.
Calculation:
- Annualised income = R35,000 × 12 = R420,000
- Tax on R420,000 = R77,362 + 31% of (R420,000 − R370,500) = R77,362 + R15,345 = R92,707
- Less primary rebate = R92,707 − R17,235 = R75,472
- Monthly PAYE = R75,472 ÷ 12 = R6,289
Factors Affecting PAYE
- Salary increases or bonuses: May push you into a higher tax bracket for that month
- Fringe benefits: Company car, housing, medical aid subsidy are added to remuneration
- Allowances: Travel, subsistence, and other allowances may have PAYE implications
- Medical tax credits: Reduce the PAYE payable each month
Employer Responsibilities
Registration
Employers must register for PAYE with SARS before paying any employee. Registration is done at a SARS branch using the EMP101 form.
Monthly Obligations
- Calculate PAYE correctly for each employee
- Deduct PAYE from employee salaries
- Submit EMP201 declaration by the 7th of each month
- Pay the total amount due to SARS
- Issue IRP5/IT3(a) certificates to employees by 31 May each year
Record Keeping
Employers must maintain records for 5 years, including:
- Employee registers
- Payslips and payment records
- EMP201 submissions and proof of payment
- IRP5 certificates issued
- EMP501 reconciliations
What Employees Should Know
Checking Your Payslip
Always verify that your PAYE deduction is correct:
- Confirm your basic salary matches your contract
- Check that any allowances are correctly coded
- Verify fringe benefits (company car, etc.) are accurately reflected
- Ensure medical tax credits are applied
Why Your PAYE Might Be Wrong
- Incorrect tax number on the payroll system
- Wrong tax directive applied
- Fringe benefits not correctly valued
- Multiple employers not coordinated (each deducts independently)
- Incorrect medical aid dependent count
Understanding IRP5 Codes
SARS uses specific source codes on your IRP5. Common codes include:
| Code | Description |
|---|---|
| 3601 | Income — Salary/Wages |
| 3602 | Income — Commission |
| 3603 | Income — Overtime |
| 3604 | Income — Bonus |
| 3605 | Income — Director’s Fees |
| 3701 | Travel Allowance |
| 3702 | Reimbursive Travel Allowance |
| 3801 | Company Car Fringe Benefit |
| 3810 | Medical Aid Fringe Benefit |
| 4001 | Pension — Employee Contribution |
| 4003 | Retirement Annuity — Employee Contribution |
| 4005 | Medical Aid Contributions |
| 4102 | PAYE Deducted |
Fringe Benefits and PAYE
Fringe benefits are non-cash benefits that SARS treats as taxable income. Common fringe benefits include:
Company Car
Taxable benefit calculated as 3.5% (or 3.25% with maintenance plan) of the vehicle’s determined value per month. The employee can reduce this by proving business travel.
Housing Benefit
If your employer provides accommodation, the benefit is calculated based on the accommodation’s value and location.
Medical Aid Subsidy
If your employer pays a portion of your medical aid, this is a taxable fringe benefit unless the subsidy is structured as a non-taxable contribution.
Travel Allowances and PAYE
Travel Allowance
Employers pay a fixed amount for business travel. PAYE is deducted at 80% of the travel allowance (20% business use assumed). At year-end, the employee must claim actual business travel using a logbook.
Reimbursive Travel Allowance
Employer reimburses per kilometre travelled. If the rate exceeds the SARS prescribed rate (R4.64 per km for 2026), the excess is taxable.
Monthly PAYE Submission (EMP201)
Employers submit the EMP201 monthly by the 7th, reporting:
- Total PAYE deducted from all employees
- Total UIF contributions (1% employee + 1% employer)
- SDL (if applicable)
EMP501 Reconciliation
Twice-yearly reconciliation:
- Interim: October 2025 (March to August)
- Annual: May 2026 (full tax year)
Common PAYE Mistakes
- Incorrect employee tax numbers on IRP5s
- Late EMP201 submissions
- Not applying medical tax credits
- Incorrect valuation of fringe benefits
- Missing EMP501 reconciliation deadlines
- Not updating payroll for tax table changes
Frequently Asked Questions
Can I get a refund of PAYE already paid?
No, PAYE cannot be refunded directly by your employer. However, when you file your annual ITR12 tax return, you can claim deductions that reduce your taxable income. If your total PAYE paid exceeds your final tax liability, the difference is refunded by SARS after you file your return.
Why did my PAYE increase even though my salary stayed the same?
Possible reasons include: (1) you received a bonus or other income in that month which pushed you into a higher annualised tax bracket, (2) your employer corrected a previous under-deduction, (3) a fringe benefit was added or revalued (e.g., company car), (4) medical tax credits were reduced due to a change in dependents, or (5) tax table changes for the new tax year. Check your payslip details or speak to your payroll department.
Do I need to pay PAYE on my director’s fees?
Yes. Director’s fees are taxable income and subject to PAYE if paid by a company. The company must deduct PAYE using the standard tax tables. If you receive director’s fees from multiple companies, each company deducts PAYE independently, which may result in over-deduction — you’ll claim a refund when filing your ITR12.
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