Does a retirement annuity reduce PAYE tax?

Yes. Retirement annuity (RA) contributions are deductible from your taxable income, up to 27.5% of the greater of your gross remuneration or taxable income, with a maximum deduction of R430,000 per year for 2026/2027. This reduces the income SARS taxes, which reduces your monthly PAYE.

PAYE Calculator South Africa

Q: What is the tax-free threshold in South Africa for 2026/2027?

For the 2026/2027 tax year, South Africans under 65 pay no income tax on annual earnings below R99,000. Those aged 65–74 have a threshold of R153,250, and those 75 and older have a threshold of R171,300.

Calculate your monthly take-home pay using the official SARS 2026/2027 tax brackets. Updated for the tax year running 1 March 2026 to 28 February 2027.

Whether you're starting a new job, negotiating a salary increase, or just trying to understand your payslip — this PAYE calculator gives you an instant breakdown of your gross salary, income tax, UIF contribution and take-home pay. All calculations use the official SARS progressive tax tables for the 2026/2027 tax year.

Enter Your Details

Monthly gross salary Your total salary before any deductions

Your age group Determines your SARS rebate amount

Medical aid dependants Including yourself (0 = no medical aid)

Monthly RA / pension contribution Optional — reduces your taxable income

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Enter your monthly gross salary above to see your take-home pay breakdown.

How PAYE is Calculated in South Africa

PAYE stands for Pay As You Earn. It is the system South African employers use to withhold income tax from employees' salaries and pay it directly to SARS on their behalf every month. Rather than receiving a large tax bill at the end of the year, your employer deducts the correct amount of tax from each payslip throughout the year.

The amount deducted depends on your annual taxable income, your age, and whether you qualify for any tax credits such as medical aid contributions or retirement annuity deductions.

The Seven SARS Tax Brackets for 2026/2027

South Africa uses a progressive tax system. This means you only pay the higher rate on the portion of income that falls in that bracket — not on your entire salary. The 2026/2027 tax brackets (1 March 2026 to 28 February 2027) are:

Taxable income (annual)	Tax rate	Base tax owed
R1 – R245,100	18%	—
R245,101 – R383,100	26%	R44,118 + 26% above R245,100
R383,101 – R530,200	31%	R79,998 + 31% above R383,100
R530,201 – R695,800	36%	R125,599 + 36% above R530,200
R695,801 – R887,000	39%	R185,215 + 39% above R695,800
R887,001 – R1,878,600	41%	R259,783 + 41% above R887,000
R1,878,601 and above	45%	R666,339 + 45% above R1,878,600

Age-Based Rebates — What They Are and How They Work

After calculating the gross tax from the brackets above, SARS subtracts a flat rebate from your tax liability. A rebate is not a deduction from income — it is a direct reduction in the tax you owe. For 2026/2027:

Primary rebate (all taxpayers): R17,820 per year
Secondary rebate (age 65–74): additional R9,765 per year
Tertiary rebate (age 75+): additional R3,249 per year

This means someone under 65 effectively pays no income tax on annual earnings below R99,000 — because the 18% tax on R99,000 is fully offset by the primary rebate of R17,820.

Step-by-Step Manual Calculation Example

Let's calculate the monthly PAYE for a South African employee earning R25,000 gross per month, aged under 65, with no medical aid and no retirement annuity contributions.

Step 1 — Calculate annual taxable income

/* Annual gross = monthly × 12 */ R25,000 × 12 = R300,000 annual taxable income

Step 2 — Apply the tax brackets

/* Bracket 1: 18% on first R245,100 */ R245,100 × 18% = R44,118 /* Bracket 2: 26% on R300,000 − R245,100 = R54,900 */ R54,900 × 26% = R14,274 Gross annual tax = R44,118 + R14,274 = R58,392

Step 3 — Subtract the primary rebate

R58,392 − R17,820 (primary rebate) = R40,572 annual PAYE

Step 4 — Divide by 12 for monthly PAYE

R40,572 ÷ 12 = R3,381 monthly PAYE

Step 5 — Calculate UIF contribution

/* UIF = 1% of gross, capped at R177.12/month */ R25,000 × 1% = R250.00 monthly UIF /* Below the cap of R177.12 — wait, R250 exceeds the cap */ UIF capped at R177.12/month

Step 6 — Calculate take-home pay

R25,000 − R3,381 (PAYE) − R177.12 (UIF) = R21,441.88 take-home pay

Item	Amount
Monthly gross salary	R 25,000.00
Annual taxable income	R 300,000.00
Annual PAYE tax (pre-rebate)	R 58,392.00
Primary rebate	− R 17,820.00
Annual PAYE payable	R 40,572.00
Monthly PAYE	− R 3,381.00
Monthly UIF (capped)	− R 177.12
Monthly take-home pay	R 21,441.88

What is the UIF Contribution?

UIF stands for Unemployment Insurance Fund. Both you and your employer each contribute 1% of your gross monthly salary to the UIF — making a total contribution of 2% of your salary. The employee's 1% is deducted from your pay each month.

The UIF contribution is capped at a maximum earnings ceiling of R17,712 per month for the 2026/2027 period. This means the maximum employee UIF contribution is R177.12 per month regardless of how much you earn above that ceiling.

If you are retrenched or become unemployed, these UIF contributions fund the benefit payments you can claim. See our UIF Benefit Calculator to estimate what you would receive.

How Medical Aid Tax Credits Reduce Your PAYE

If you contribute to a medical aid scheme, SARS allows a monthly tax credit that is deducted directly from your PAYE liability. For 2026/2027, these credits are:

Main member: R376 per month
First dependant: R376 per month
Each additional dependant: R254 per month

For example, if you are on a medical aid with your spouse and one child (3 people), your monthly medical aid tax credit is R376 + R376 + R254 = R1,006 per month. This amount is subtracted from your PAYE, not from your income — making it a powerful tax benefit.

How Retirement Annuity Contributions Reduce PAYE

Contributions to a retirement annuity (RA), pension fund or provident fund reduce your taxable income before PAYE is calculated. For 2026/2027, the deduction is limited to the lesser of:

27.5% of your gross remuneration, or
R430,000 per year (the annual cap)

This means a person earning R25,000 per month (R300,000 annual) who contributes R1,500/month (R18,000/year) to an RA reduces their taxable income to R282,000 — saving approximately R4,680 in tax per year, or R390 per month on their PAYE.

If you want to understand the full tax saving power of your RA, see our Annual Bonus Tax Calculator.

Frequently Asked Questions

How is PAYE calculated in South Africa?

PAYE is calculated using SARS progressive tax brackets. Your annual taxable income (after deductions like retirement contributions) is taxed in slices at rates from 18% to 45%. Age-based rebates and medical aid credits are then subtracted. The result is divided by 12 for the monthly PAYE deduction on your payslip.

What is the tax-free threshold in South Africa for 2026/2027?

For under-65s, the annual tax threshold is R99,000 — equivalent to R8,250 per month. Those aged 65–74 have a threshold of R153,250 per year. Those 75 and older have a threshold of R171,300. Below these amounts, no income tax is payable.

What is the difference between PAYE and income tax?

Income tax is what you owe SARS on your annual earnings. PAYE is the collection mechanism — your employer withholds the tax from each salary payment and pays it to SARS monthly on your behalf. For most salaried employees, PAYE and income tax are the same thing. The difference only matters if you have other income sources outside your salary.

Does a retirement annuity reduce my monthly PAYE?

Yes. Retirement annuity contributions are deducted from your taxable income before PAYE is calculated, up to 27.5% of gross income or R430,000 per year — whichever is lower. This lowers the income SARS taxes, reducing your monthly PAYE deduction immediately through your employer's payroll. The more you contribute, the less PAYE you pay.

How much UIF do I pay per month?

You pay 1% of your gross monthly salary as your UIF contribution. However, UIF contributions are capped at a maximum monthly earnings ceiling of R17,712. So if you earn more than R17,712 per month, your UIF contribution is fixed at R177.12 per month regardless of your actual salary. Your employer also contributes 1%, bringing the total to 2%.

Does a retirement annuity reduce my PAYE?

Yes. RA contributions are deductible up to 27.5% of the greater of remuneration or taxable income, capped at R350,000 per year. The deduction reduces your taxable income before SARS applies tax brackets, directly lowering your monthly PAYE deduction.

What is the difference between PAYE and income tax in South Africa?

PAYE (Pay As You Earn) is the mechanism — your employer withholds income tax monthly and pays it to SARS on your behalf. Income tax is the liability itself. At year-end, SARS reconciles your total PAYE paid against your actual tax liability. If you overpaid, you get a refund; underpaid, you owe the difference.

What is the top tax rate in South Africa?

The top marginal income tax rate in South Africa is 45%, applying to taxable income above R1,817,000 per year (2026/2027). Most salaried employees fall in the 26%–36% effective rate range. The effective rate is always lower than the marginal rate because lower income bands are taxed at lower rates first.

Related Calculators

Working through your finances? These tools complement the PAYE Calculator:

Commission earner? Use the Commission Tax Calculator to see exactly how tax differs on a big commission month vs a normal salary month.

Employers: use the Payroll Cost Calculator to see the full cost per employee including UIF, SDL and COIDA contributions.

Disclaimer: This PAYE calculator is provided for informational and educational purposes only. Results are estimates based on SARS 2026/2027 tax tables and standard deduction rules. Actual PAYE deductions may differ based on individual circumstances including multiple income sources, fringe benefits, travel allowances, or SARS directives. Always verify your tax position with a registered tax practitioner or consult the official SARS website.