How to calculate PAYE, UIF and SDL in South Africa (2026/27 tables)
A working-from-scratch guide to South African employee tax for the 2026/27 year. New brackets, the R 17 712 UIF ceiling, the SDL R 500 000 threshold, and three worked examples — the way your payroll system actually does it.
Every South African payslip is the sum of three deductions and one set of credits. Get them right and payroll is boring. Get them wrong and you owe SARS a 10% penalty plus interest at 10.25% a year.
This is the long version of how those three deductions — PAYE, UIF and SDL — are calculated for the 2026/27 tax year (the period from 1 March 2026 to 28 February 2027). It’s the version your payroll system does behind the scenes. Once you’ve read it, you’ll be able to sanity-check any line item on any employee’s payslip.
What changed for 2026/27
Budget 2026 was the first inflationary relief since 2023/24. The tax brackets, rebates and thresholds all moved up by roughly 3.4%.
The marginal rates did not change — only the bands at which each rate kicks in. The UIF rate, ceiling and the SDL rate are all unchanged from prior years.
PAYE: Pay-As-You-Earn explained
PAYE is the employer’s monthly withholding of the employee’s income tax. Under the Fourth Schedule to the Income Tax Act, the employer is required to deduct PAYE and pay it over to SARS within seven days of month-end.
Step 1 — Annualise the salary
PAYE is calculated on an annual equivalent of the employee’s monthly pay. The system pretends the employee will earn the same gross every month for twelve months, calculates the resulting annual tax, then divides by twelve.
So for an employee on R 30 000 a month:
Annual equivalent = R 30 000 × 12 = R 360 000
If the employee receives a once-off bonus or a 13th cheque, that’s handled separately (more on that below).
Step 2 — Apply the 2026/27 brackets
The 2026/27 tax brackets are:
Note the brackets are cumulative: the base amount in each row is the tax payable on the upper limit of the previous bracket. That’s the standard way SARS presents them, and the way your payroll system stores them.
For our R 360 000-a-year employee:
R 360 000 falls in bracket 2.
Tax = R 44 118 + 26% × (R 360 000 − R 245 100)
= R 44 118 + 26% × R 114 900
= R 44 118 + R 29 874
= R 73 992 per year (pre-rebate)
Step 3 — Subtract rebates
Everyone gets the primary rebate of R 17 820. People aged 65 and older also get the secondary rebate of R 9 765. People aged 75 and older get the tertiary rebate of R 3 249 on top of the other two.
Rebates are additive, not selective. A 76-year-old gets all three: R 17 820 + R 9 765 + R 3 249 = R 30 834 a year.
For our example (under 65):
R 73 992 − R 17 820 = R 56 172 per year
÷ 12 = R 4 681 per month PAYE
That’s the headline PAYE. Before it lands on the payslip, it gets one more adjustment.
Step 4 — Apply medical scheme tax credits
If the employer pays into a registered medical scheme on the employee’s behalf (or the employee is the principal member of a scheme and the contributions are deducted from payroll), the employee gets a Medical Scheme Fees Tax Credit (MTC) for the 2026/27 year of:
- R 376 / month for the main member
- R 376 / month for the first dependant
- R 254 / month for every additional dependant
So a main member with a spouse and two children gets R 376 + R 376 + R 254 + R 254 = R 1 260 / month in credits.
The MTC is subtracted after rebates and cannot push PAYE below zero. It’s applied monthly in payroll, not annually.
Step 5 — Subtract pre-PAYE deductions
Two big ones to remember:
-
Retirement contributions (pension, provident, retirement annuity) reduce taxable income before PAYE is calculated. The cap is 27.5% of the greater of remuneration or taxable income, capped at R 430 000 a year for 2026/27 (up from R 350 000 — the first increase since 2016).
-
Donations to Section 18A public-benefit organisations are deductible up to 10% of taxable income.
These are taken off before the bracket maths. So an employee on R 30 000 a month who contributes R 3 000 to a pension fund has a taxable income of R 27 000 / month, not R 30 000 / month, for PAYE purposes.
UIF: the cap that catches everyone
UIF (Unemployment Insurance Fund) is the easy one. 1% of remuneration is deducted from the employee and another 1% is paid by the employer. Two percent in total, split equally.
The catch is the cap. UIF is calculated on remuneration up to a ceiling of R 17 712 per month (R 212 544 per year). That ceiling has been in force since 1 June 2021 and is unchanged for 2026/27.
The maximum UIF on any single payslip is therefore:
R 17 712 × 1% = R 177.12 (employee)
+ R 177.12 (employer)
= R 354.24 in total
If your employee earns R 17 712 or less, UIF is 1% of the actual gross. Above R 17 712, the contribution is fixed at R 177.12 — whether the employee earns R 20 000, R 200 000, or R 2 million.
Three details worth knowing:
- Commission earners under the Skills Development Levies Act are excluded from UIF. If 50% or more of an employee’s remuneration is commission, they don’t contribute. (Most software gets this wrong by default — check yours.)
- Pensioners continuing to work past retirement age still contribute (no upper age limit).
- UIF is reported separately to the UIF Commissioner via uFiling every month, in addition to being reflected on the monthly EMP201 to SARS.
SDL: the 1% nobody talks about
The Skills Development Levy is 1% of the employer’s total leviable payroll, paid by the employer only. Unlike UIF and PAYE, there’s no employee portion.
The R 500 000 exemption. If your total annual payroll is R 500 000 or less, you’re exempt from SDL altogether. You must still register with SARS as an employer — you just don’t pay the levy.
For everyone else, SDL is 1% of "leviable amount", which is broadly the same as remuneration for PAYE purposes but with a few tweaks:
- Excludes pensions paid to former employees.
- Excludes retirement lump-sum payments.
- Excludes reimbursive amounts that don’t form part of taxable income.
In practice, for a normal salaried employee on R 30 000 / month, SDL is exactly R 300.
The Department of Higher Education and Training collects 80% of SDL revenue and pays it back to SETAs (Sector Education and Training Authorities). The remaining 20% goes to the National Skills Fund.
One useful 2026 change: the mandatory grant for employers that submit a Workplace Skills Plan + Annual Training Report doubled from 20% to 40% of their SDL contribution. If you spend any time training people, register with your SETA and claim it back.
Three worked examples
Let’s put it all together. Assume each employee is under 65, has no medical aid or retirement contributions, and the employer’s total payroll is over R 500 000 / year (so SDL applies).
R 30 000 / month gross
R 75 000 / month gross
Annual = R 900 000
Bracket 6: R 259 783 + 41% × (R 900 000 − R 887 000)
= R 259 783 + R 5 330
= R 265 113
Less rebate: − R 17 820 = R 247 293 / year
Monthly PAYE: R 20 608
R 150 000 / month gross
Annual = R 1 800 000 (still in bracket 6, just under the top)
Tax = R 259 783 + 41% × (R 1 800 000 − R 887 000)
= R 259 783 + R 374 330
= R 634 113
Less rebate: − R 17 820 = R 616 293 / year
Monthly PAYE: R 51 358
Notice the UIF column doesn’t move between R 75 000 and R 150 000. Once the cap kicks in, it’s fixed.
Bonuses, 13th cheques and once-off payments
The annualised method falls apart when someone gets a non-recurring amount. SARS handles this with the "annual equivalent + grossed-down" approach. The mechanics:
- Calculate annual PAYE on the regular monthly salary.
- Calculate annual PAYE on the regular salary plus the bonus.
- Subtract one from the other.
- The difference is the PAYE on the bonus, deducted in full in the month the bonus is paid.
This avoids the bonus being treated as if it’ll be repeated twelve times, which would over-tax it. Every modern payroll system handles this automatically — but it’s the kind of thing that breaks in spreadsheets.
The end-of-month checklist
If you run payroll by hand, here’s the order of operations:
- Confirm gross for each employee (salary + allowances + commissions + overtime).
- Deduct pre-tax items (pension, RA, medical aid if applicable).
- Calculate PAYE on the annualised remainder, apply rebates, subtract medical credits.
- Deduct UIF (1%, capped at R 177.12).
- Calculate employer UIF and SDL (don’t deduct, but track them for the EMP201).
- Net pay = Gross − PAYE − UIF − other deductions.
- Sum PAYE + UIF (both) + SDL for the EMP201 total to pay SARS by the 7th of next month.
- Generate payslips and dispatch.
- File UI-19 and UI-7 to the UIF Commissioner separately via uFiling.
What payloop does for you
Every number above is built into payloop’s tax engine. The 2026/27 brackets, rebates, MTC, UIF cap and SDL threshold went live on 1 March 2026. We update the engine within hours of a SARS budget change.
When you run a payroll on payloop:
- The annualised PAYE is calculated to the cent for every employee.
- The UIF cap is applied automatically.
- The SDL exemption is calculated against your rolling 12-month payroll, not the calendar year.
- The bonus / 13th-cheque maths is handled without you having to think about it.
- The EMP201 is staged for SARS, the bank-import file is generated in your bank’s format, and the signed payslips dispatch the moment you close the run.
If you’d like to see what your next payroll looks like against the 2026/27 tables — with your actual employees, your medical aid, your pension — book a 30-minute working session and we’ll run it side by side with your current system.
Frequently asked questions
Does PAYE apply to independent contractors?
No — unless they fail the SARS "common-law employee" test, in which case you’re obliged to deduct PAYE retroactively. Real independent contractors invoice you and handle their own provisional tax.
How is PAYE on overtime calculated?
Overtime is added to that month’s gross before the annualisation step. It gets taxed at the employee’s marginal rate. No special overtime tax exists in South Africa.
Do I have to pay UIF on directors’ salaries?
Yes, if the director is also an employee. A non-executive director who only receives directors’ fees (and isn’t employed) falls outside the UIF Act.
What’s the difference between SDL and the UIF contribution?
SDL goes to SETAs and the National Skills Fund (used for training levy disbursements). UIF goes to the Unemployment Insurance Fund (used to pay unemployment benefits). They’re separately legislated, separately reported, and serve different purposes.
Can the medical credit ever reduce PAYE below zero?
No. The MTC is non-refundable. If an employee’s PAYE is already zero, the credit doesn’t produce a refund.
Where do I find the official 2026/27 tables?
The current version lives on the SARS Rates of Tax for Individuals page. The PDF version of the Budget 2026 Tax Guide is at sars.gov.za/wp-content/uploads/Docs/Budget/Budget2026/Budget-tax-guide-2026-web-version.pdf.
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