How do I calculate provisional tax in South Africa?

# How to Calculate Provisional Tax in South Africa Provisional tax in South Africa is calculated based on **estimated taxable income** for the current tax year. You must pay provisional tax if your total tax liability (excluding PAYE) will exceed **R1,000** for the year. ## Who Must Pay Provisional Tax You're liable for provisional tax if you: - Earn business income, rental income, or investment income - Are a company, trust, or individual with non-salary income - Expect your tax liability to exceed R1,000 for the tax year **Exemption**: Individuals whose only income is salary (subject to PAYE) and whose total tax liability won't exceed R1,000. ## Calculation Methods ### Method 1: Basic Amount (IRP6) SARS issues an IRP6 with a **basic amount** based on your previous year's assessment. This is the simplest method. **First Payment**: 50% of the basic amount **Second Payment**: 100% of the basic amount, less the first payment ### Method 2: Estimate Method Calculate based on your estimated taxable income for the current year. **Formula**: 1. Calculate normal tax on estimated taxable income 2. **First Payment**: 50% of estimated tax liability 3. **Second Payment**: 100% of estimated tax liability, less first payment and any PAYE credits ### Method 3: Prior Year Method Use 100% of the previous year's actual tax liability as your provisional tax for the current year. ## Calculation Example **Estimated taxable income**: R500,000 **Normal tax calculation** (2024/25 rates): - Tax on R500,000 = R101,829 **Provisional tax payments**: - **First payment**: R101,829 ÷ 2 = **R50,915** - **Second payment**: R101,829 - R50,915 = **R50,914** ## Payment Deadlines - **First payment**: End of August (6 months after tax year start) - **Second payment**: End of February (last day of tax year) ## Important Considerations **Penalties apply** if you underestimate by more than 20% or R1,000 (whichever is greater). SARS charges interest on late payments at the prescribed rate. **Top-up payments** may be required if your estimate was too low when filing your annual return. **Companies** follow the same calculation principles but use the 27% corporate tax rate. ## How WeekdayApp Helps WeekdayApp automatically tracks provisional tax deadlines and calculates estimated payments based on your client data, ensuring you never miss SARS deadlines. Starting at R199/user/month, it helps accounting practices manage all compliance requirements efficiently. ## Key Takeaway Always use the method that results in the most accurate estimate of your tax liability. When in doubt, use the prior year method to avoid penalties, then adjust with a top-up payment when filing your annual return.