Complete guide to personal income tax

What you will learn in this guide:

After reading this guide you'll understand the importance of personal income tax, and what will happen if you don't pay your tax. More importantly, you'll know how and when to submit your tax returns.

Introduction

This is a comprehensive guide to personal income tax from what it includes, to exemptions and important filing dates.

What is personal income tax?

The South African Revenue Services (SARS) defines income tax as the normal tax that is paid on your taxable income. This includes your salary, wages, bonuses, overtime income, commissions, and fringe benefits. Personal income tax can also come from investments (interest and dividends), pension withdrawals, capital gains (which come from the sale of an asset), and annuities.

Who is liable for personal income tax?

There are many factors that determine whos liable for personal income tax.

If you earn less than the following thresholds per year, have one employer, no other sources of additional income, and no deductions that you want or need to claim for, you may not need to submit a tax return. For the 2023 tax year (1 March 2022 - 28 February 2023), the thresholds are:

• R91,250 if you are younger than 65 years.
• R141,250 if you are 65 years of age but below 75 years.
• R157,900 if you are 75 years of age or older.

These tax threshold amounts are announced annually during the budget speech by the minister of finance.

How much tax are you liable for?

The amount of tax you pay is set on a sliding scale of earnings. People who earn more will pay more and those who earn less will pay less. This tax method is described as progressive.

The tax table as of 1 March 2022 is as follows:

Why do you need to pay tax?

Tax helps the government to carry out its duties, such as providing public goods and services and paying civil servants. Roads, public schools, hospitals, and clinics are some of the services that the government uses tax to fund. The salaries of civil servants such as teachers, nurses, and the police are also derived from taxes. The government also uses tax to look after poor and vulnerable people. Social grant beneficiaries depend on the tax that citizens pay.

How is it collected?

SARS is the body thats responsible for administering tax in South Africa. If youre just starting to work you can register as a taxpayer through your employer (employers are required to register with SARS within 21 business days of becoming an employer, unless none of their employees are liable for income tax), or you can visit the nearest SARS branch or website.

After registration, youll be given a unique tax number that will be yours permanently. Your employer will then deduct the tax amount that youre required to pay from your salary every month and pay it to SARS. When registering as a taxpayer youll need your identity document.

Submitting your tax returns

Tax season for 2022 began on 1 July and ends on 23 January 2023. Individuals who are not provisional taxpayers should submit their tax returns from 1 July 2022 until 24 October 2022.

Any person who receives an income other than regular remuneration is a provisional taxpayer. Most salary earners are therefore not provisional taxpayers, if they have no other sources of income.

If you have received income such as remuneration, capital gains, travel allowance dividends, interest from investments, or rent, you should file a tax return. A tax return allows you to calculate how much you owe or are owed by SARS, and to request refunds if youve overpaid. It also allows you to arrange payments.

Between 1 July and 24 October you need to obtain an IRP5 form to submit to SARS. This is a certificate that provides information about your income, tax, and all other deductions that are issued by an employer at the end of the tax year.

In order to file a tax return for other income, such as interest from investments, rental income, and capital gains, you'll need to get an IT3b form from your bank. For non-salaried taxpayers or provisional taxpayers, an IRP6 form will be needed to submit your returns. You can download this from your banks website and submit it to your nearest SARS branch or through eFiling.

Who is exempt from filing for tax returns?

If you earn less than the thresholds noted above, have one employer, no other sources of additional income, and no deductions that you want, or need, to claim for, you may not need to submit a tax return.

If you are required to submit a tax return, and you fail to do so, SARS will charge you an admin penalty. The penalty will keep recurring for each month that you dont pay, for up to 35 months. This penalty can range from R250 to R16,000 per month, depending on your income. If you dont pay the penalty, SARS will find ways to collect it from you, such as attaching your salary.

What if you don't pay tax?

Tax evasion is a criminal offence. If you conceal or misrepresent the state of your financial affairs to avoid paying tax, you could be fined or face five years jail time.

If you've submitted your tax returns but fail to pay what you owe, SARS will deal with you in the following ways:

• Collect the debt from someone who holds money on your behalf, such as employer, bank, or customer.
• Issue a judgement against you.
• Attach and sell your assets.
• Obtain a preservation order in respect of your assets.
• Obtain an order for any assets you hold offshore, requiring the assets to be repatriated to South Africa. In the interim, your right to trade or to travel can be restrained.
• Liquidate or sequestrate your estate. 

Paying provisional tax

Non-salaried taxpayers and businesses are classified as provisional taxpayers. The first provisional tax payment must be made within six months of the start of the year of assessment. The second payment must be made no later than the last working day of the year of assessment. These payments are not refundable, and when filing your tax return, you will need an IRP6 form.

Tips when filling your tax return form

Your income tax return will be pre-populated with information available to SARS, such as personal particulars (for example name, surname, physical and postal address, banking details, etc) and information received from third parties (e.g., employers, pension funds, retirement funds and medical schemes).

You must check your personal particulars for accuracy. Only correct the fields containing incorrect information. If the return is posted to you, your information will be pre-populated in pink. Please note the following when correcting any of the pre-populated information on the posted return:

• Use a black pen to write over the information printed in pink.
• Use capital letters.
• Keep your writing within the spaces provided.
• Don’t be concerned if some of the pink lettering is still displayed where the correction in black has been made. SARS will ignore the pink information if it has been overwritten in black.
• Write the word or number in full. Don’t change only one letter of a name or one digit of a number. Rewrite the full name or number.
• If you want to delete pre-populated information that is no longer applicable, do so by putting a horizontal line through the middle of the incorrect characters in the field.
• If you make a mistake when completing a field, don’t attempt to correct it by completing the correct information outside the field, or by making notes in the margin. This information will not be considered as valid and will not be taken into account in the calculation of the assessment. You must contact SARS to request a new return. Alternatively, you can register for eFiling and request and submit your return electronically.
• Although your return is customised according to your specific needs, there might still be fields on your return that aren’t applicable to you. Leave these spaces blank. Don’t write N/A or enter zeros or strike through the spaces or blocks that don’t apply.
• All relevant parts of the return must be completed. An incomplete return will be sent back to you and will be considered outstanding until the fully completed return is received. This could result in penalties for late submission of a return.

SUMMARY

• Personal income tax applies to your salary, wages, bonuses, overtime income, commissions, fringe benefits, investments (interest and dividends), pension withdrawals, capital gains (which come from the sale of an asset), and annuities.
• The amount of tax you pay is set on a sliding scale.
• The reason you pay tax is to help the government carry out its duties, such as providing public goods and services and paying civil servants.
• SARS is the body that’s responsible for administering tax in South Africa.
• The tax year begins on 1 March and ends on 28 February, or 29 February in a leap year.
• If you conceal or misrepresent the state of your financial affairs to avoid paying tax, you could be fined or face five years’ jail time.