South Africans can pay less tax

With filing season now quickly approaching, Nedbank said there are several ways South Africans can legally reduce their tax bill.

“Submitting a tax return often feels overwhelming. However, it remains a necessary part of managing your finances responsibly, the bank said.

“Everyone who earns an income above a certain threshold in South Africa must pay tax, and trying to sidestep this obligation is illegal.”

“But when you know how tax works and what you’re allowed to claim, you can organise your finances in a way that ensures you pay only what you’re legally required to – nothing extra.”

How simple or complicated someone’s tax affairs are, and what they are able to cut from their tax bill, will depend on several factors.

Permanent employees usually pay tax through the pay-as-you-earn (PAYE) system, Nedbank said. Their employer deducts tax from their salary each month and pays it directly to the South African Revenue Service (SARS).

“This helps you avoid having to budget for provisional tax payments separately. The downside is that PAYE doesn’t automatically consider your other possible deductions.”

“So filing a yearly tax return is important, as it’s your chance to claim back any allowable expenses. You can handle this through SARS eFiling, or consult a tax professional to identify what you’re entitled to deduct.”

South Africans who work for themselves, on the other hand, need to register as a provisional taxpayer, Nedbank explained.

Generally, they pay tax twice a year in August and February, although they can make a top-up payment in September of the following year.

“Because you don’t have an employer submitting tax on your behalf, it’s vital to know your tax bracket and set aside the right amount for tax whenever you receive income.”

Positively, the bank noted that provisional taxpayers benefit from being able to factor in their deductions upfront, meaning they pay SARS only what they owe.

“However, this makes it even more important to understand the tax rules. Miscalculating your deductions could lead to unexpected penalties, so professional guidance can be helpful.”

How South Africans can legally reduce their tax burden

Nedbank explained that someone’s tax rate depends entirely on how much they earn. Those who earn below the yearly threshold won’t pay tax at all.

“Once your income exceeds that threshold, tax is calculated according to brackets that increase as income rises.”

“Because SARS adjusts these brackets regularly, it’s wise to check for updates each March after the annual budget speech.”

For taxpayers, knowing which bracket they fall into will help them determine which deductions or investments could lower their taxable income, the bank said.

There are several practical ways taxpayers can ensure they pay only what they are required to. First, Nedbank advised that everyone should track their deductible expenses.

“Different jobs are allowed different deductions – such as travel expenses when travelling for business, or entertainment costs when having business meetings – so it’s worthwhile to get expert advice on what applies to you.”

“Keep clear records and receipts of all deductible expenses, whether you’re an employee or a freelancer. Digitising receipts or using simple accounting tools can save time and prevent complications if SARS asks for verification.”

The bank recommended that South Africans also consider tax-efficient investments. Some investments, such as retirement annuities, offer tax benefits.

“You can deduct up to 27.5% of your taxable income when contributing to approved retirement products, subject to the updated annual cap of R430,000 – increased from the previous R350,000.”

“Contributions that exceed this cap are carried over to future years, ensuring you don’t lose the tax benefit. You can make regular monthly contributions, ad hoc payments, or a single lump sum before the end of the tax year.”

Nedbank added that these contributions may help taxpayers reduce their taxable income and, in some cases, even lower their tax bracket.

“As well as retirement annuities, you can also contribute to a tax-free savings investment, either in the form of a savings account, fixed deposit or even a tax-free savings unit trust account.”

“However, you can contribute only R46,000 a year – increased from the previous R36,000 limit.”

Tax cuts for South Africans who work from home, donate to charities, and use their own cars for work

According to Nedbank, some South African taxpayers may also be able to claim qualifying remote work or business expenses.

“If you work from home as a freelancer or remote employee, certain expenses may be deductible – provided that the space is used strictly for work.”

“If your working arrangement has changed – for example, shifting from office to home – it’s important to update your deductions accordingly when filing.”

Alternatively, taxpayers can also deduct donations made to charities listed as approved public benefit organisations under section 18A of the Income Tax Act from their taxable income.

However, the bank explained that in order to qualify for this deduction, the total donations for the year may not exceed 10% of that income.

“To qualify, make sure you obtain and keep the official section 18A certificate from the organisation, which SARS will need to validate your deduction.”

“Remember that if your donation exceeds 10% of your taxable income, the excess amount is not lost – it is carried forward to the following tax year and treated as a donation in that year.”

Finally, Nedbank said South Africans who use their personal cars for business can claim for business-related travel using a logbook.

“Record every trip from the beginning of March every year – including distance, destination, and purpose – and store all related receipts.”