How SARS Calculates Your Salary Tax (PAYE, UIF & Rebates)

If you are employed in South Africa, a significant portion of your salary disappears before it reaches your bank account. This is due to **PAYE (Pay-As-You-Earn)**, which is the system SARS uses to collect income tax on a monthly basis, alongside obligatory contributions like **UIF (Unemployment Insurance Fund)**.

Understanding how this calculation works is essential for verifying your payslip, negotiating salary packages, or planning your personal budget. In this guide, we walk through the step-by-step math SARS uses to calculate your take-home pay.

Step 1: Calculate Your Taxable Income

SARS does not tax your raw gross salary. First, they deduct tax-free contributions to arrive at your **taxable income**. The most common tax deduction is retirement fund contributions (pension fund, provident fund, or retirement annuity).

You can deduct contributions to registered retirement funds up to **27.5% of your gross remuneration** (capped at R350,000 per year). Any contributions below this threshold reduce your taxable income directly, thereby lowering the tax you pay.

Step 2: Determine Your Tax Bracket (SARS Income Tax Tables)

Once your taxable income is established, SARS uses a **progressive tax table** to calculate the base tax amount. Progressive tax means that as your income increases, you pay higher tax rates on the portions of income that fall into higher brackets. It is a common myth that entering a higher tax bracket means your *entire* salary is taxed at that higher rate.

For the 2025/2026 SARS tax year, the brackets are structured as follows:

Step 3: Deduct Your Tax Rebates

A **tax rebate** is a direct reduction in the amount of tax you owe (unlike a deduction, which reduces your taxable income). SARS grants standard rebates to all individual taxpayers, depending on their age:

• Primary Rebate (Under 65): R17,235 per year (which translates to a tax-free threshold of R95,750 per year).
• Secondary Rebate (65 to 74): An additional R9,444.
• Tertiary Rebate (75 and older): An additional R3,145.

The primary rebate is subtracted directly from the calculated tax amount from Step 2.

Step 4: Subtract Medical Scheme Fees Tax Credits (MTC)

If you pay contributions to a medical scheme, you receive a monthly tax rebate called the Medical Scheme Fees Tax Credit:

• Main Member: R364 per month (R4,368 per year).
• First Dependent: R364 per month.
• Additional Dependents: R246 per month per dependent.

These credits are deducted from your remaining tax liability, further reducing the monthly PAYE due.

Step 5: Add UIF (Unemployment Insurance Fund)

In addition to tax, you must contribute **1% of your gross salary** to the Unemployment Insurance Fund (UIF). Your employer matches this with another 1% contribution.

Importantly, the UIF contribution is capped at a monthly salary ceiling of **R17,712**. This means the maximum monthly UIF contribution for an employee is **R177.12**, even if they earn R100,000 per month.