If you earn income that is not fully taxed through PAYE, such as rental income, freelance fees or profit from a business, you are probably a provisional taxpayer. Provisional tax is simply a way of paying your income tax in instalments during the year rather than in one lump sum after assessment.
The two main payments
Individuals normally make the first payment by the end of August and the second by the last day of February. Companies pay according to their own year end, at the six-month point and again at year end. When a date falls on a weekend, the payment is due on the last working day before it.
The top-up payment
A third, voluntary payment can be made after year end, before your assessment is issued. Many clients use it to avoid interest on a shortfall.
Where the penalty comes from
The second payment is based on an estimate of your taxable income for the whole year. If that estimate is too far below what you actually earn, SARS can add a penalty of 20% of the shortfall, and interest runs on late or short payments. The thresholds change from time to time, so confirm the current rules with us before you submit.
What to do
Send us your management accounts or bank statements in July and again in January. That gives us time to work out a realistic estimate before the payment date.
- Diarise 31 August and the last day of February.
- Keep a record of every payment and the date it was made.
- Tell us early if your income changes sharply during the year.