Let’s talk about personal income tax

Personal income tax is one of the deductions that may be made on your salary before you receive it. Depending on how much you earn, this means there could be quite a big difference between your salary before and after deductions.

Breaking down your salary deductions

The real money that you actually receive in your account (or as cash), after deductions like income tax and UIF have been made, is known as your net salary. UIF and income tax, which shows on your payslip as PAYE (Pay As You Earn), are deductions authorised by the government, but employees can also have deductions like medical aid or a provident fund. Your gross salary is the original amount, before deductions. If you have no income deductions, then your gross salary and net salary will be the same amount.

UIF stands for Unemployment Insurance Fund, a government fund that pays people when they become unemployed under certain conditions. Not everyone is eligible for UIF compensation, for example, UIF isn’t applicable to public servants or those who work less than 24 hours p/m for an employer. (Find out more about UIF conditions here and here)

Note: If you’re applying for finance, deductions and expenses shouldn’t be grouped together. For example, if you pay for medical aid yourself, then it is an expense because you’re paying it out of your net salary, but if your employer pays it on your behalf then it’s an income deduction.

Getting personal with personal income tax

As citizens, we pay income tax (and other tax) to fund public services like roads, government hospitals, schools and electricity, etc.

Not all workers pay income tax and not everyone pays the same amount. There are different tax thresholds for different age groups and the percentage of your income that gets taxed depends on how much you earn.

For the 2021 tax year, if you’re under 65, you only have to pay income tax if you earn more than R83,100/year (that’s R6,925/month). If you’re 65-74 you only need to pay income tax if you earn more that R128,650/year and if you’re over 75 the threshold is R143,850.

For the 2021 tax year, if you earn between the minimum threshold and R205,900/year, the rate is 18% of your taxable income, whereas if you earn R205,901 –  R321,600 per year, the tax rate is R37,062 + 26% of your taxable income.

The tax rate also generally increases each tax year (in South Africa, the tax year starts March and ends the following February). Click here to find out the latest tax rates.

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