What Is PAYE? Pay As You Earn Explained
Yes. PAYE is simply the method of paying your income tax. It is deducted monthly by your employer and paid to SARS on your behalf. It is not a separate or additional tax.
What Is PAYE
PAYE stands for Pay As You Earn. It is the system where your employer deducts income tax from your salary or wages every month and pays it directly to SARS. This means you pay your tax gradually throughout the year rather than in one lump sum.
PAYE is calculated using the SARS tax tables based on your gross monthly income. Your employer uses these tables to work out how much tax to deduct each pay period.
How Is PAYE Calculated
Your employer calculates PAYE using these steps: Take your gross monthly salary. Multiply by 12 to get your annual equivalent. Apply the SARS tax tables to find your annual tax liability. Divide by 12 to get your monthly PAYE deduction. Subtract any available tax credits (medical aid, retirement annuity).
The amount left after PAYE and other deductions (UIF, pension, medical aid) is your net salary - the amount that actually goes into your bank account.
What Other Deductions Come Off Your Salary
Besides PAYE, your employer may deduct:
UIF - 1% of your gross salary (you pay 1%, employer pays 1%)
Pension or Provident Fund - your contribution percentage
Medical Aid - your portion of the premium
Retirement Annuity - if arranged through your employer
Other - union fees, garnishee orders, loans
These deductions reduce your take-home pay but some (like retirement contributions) also reduce your taxable income.
Do I Still Need to File a Tax Return If PAYE Was Deducted
Yes, you may still need to file. Even if your employer deducted PAYE, you must file an ITR12 return if:
- You earned more than one source of income
- You want to claim additional deductions (donations, home office)
- You earned interest, dividends, or rental income
- SARS sent you a notification to file
- You want a refund
Many employees who only have one IRP5 and no extra deductions do not need to file if their tax affairs are straightforward.
Why Did I Get a Tax Bill Even Though PAYE Was Deducted
This usually happens because:
Multiple income sources: Each employer applied the full tax threshold separately, but combined you are in a higher bracket
Fringe benefits: Your company car or medical aid was added to your taxable income at year-end
Under-deduction: Your employer did not deduct enough PAYE during the year
Provisional tax: You earned additional income that was not taxed through PAYE
Admin Boss can review your tax assessment and explain exactly why you owe money.
Frequently Asked Questions
Is PAYE the same as income tax?
Yes. PAYE is simply the method of paying your income tax. It is deducted monthly by your employer and paid to SARS on your behalf. It is not a separate or additional tax.
Can I claim back PAYE?
You cannot claim back PAYE directly, but you may be entitled to a refund when you file your tax return. This happens if you overpaid tax due to deductions, medical expenses, or retirement contributions that your employer did not factor in.
What happens if my employer does not pay my PAYE to SARS?
It is your employer's legal obligation to pay PAYE to SARS. If they fail to do so, SARS can hold the employer liable. However, you should still file your tax return with your IRP5 as proof. Report non-compliant employers to SARS.
How do I check if my employer is paying my PAYE?
Your IRP5 shows the total PAYE deducted and paid. Log into SARS eFiling and check if the PAYE amount on your tax certificate matches what appears on your ITR12. If there is a mismatch, contact your employer's payroll department.
Do freelancers pay PAYE?
Freelancers and independent contractors typically do not have PAYE deducted because they are not employees. Instead, they must register as provisional taxpayers and pay tax twice a year through IRP6 payments.
Need Help With Your Tax?
Admin Boss is a registered tax practice with over 20 years of experience helping South African individuals and businesses navigate SARS.