How is the PAYE on my payslip calculated?

An example of how the PAYE on your payslip is calculated each month.

We will look at four examples to explain how PAYE is calculated. The first will be where only a basic salary is received, the second we will add the effect of retirement contributions, the third we will look at the effect of medical aid contributions and fourthly, we will look at the effect of both retirement and medical aid contributions.

Retirement contributions, whether it be pension fund, retirement annuity or provided fund, and medical aid contributions, are the two most common deductions for most employees. This is the reason for including them in the examples.

To calculate the PAYE liability per month, we will refer to the tax table below for the 2022 tax year, which can also be found on the SARS website, along with the tax tables for prior years.

**Tax table for the 2022 tax year (1 March 2021 to 28 February 2022)**
Bracket	Taxable income	Rates of tax
A	R1 – R216 200	18% of taxable income
B	R216 201 – R337 800	R38 916 + 26% of taxable income above R216 200
C	R337 801 – R467 500	R70 532 + 31% of taxable income above R337 800
D	R467 501 – R613 600	R110 739 + 36% of taxable income above R467 500
E	R613 601 – R782 200	R163 335 + 39% of taxable income above R613 600
F	R782 201 – R1 656 600	R229 089 + 41% of taxable income above R782 200
G	R1 656 601 and above	R587 593 + 45% of taxable income above R1 656 600

We will also take the primary tax rebate of R15 714 for 2022 into account. A secondary tax rebate is also available for individuals 65 years and older and a tertiary rebate for individuals 75 years and older. Refer to the SARS website for the values of these as well as the prior year rebates.

Example 1 - Basic salary:

You receive a gross salary of R20 000 per month for the tax year 1 March 2021 to 28 February 2022.

Salary per month	R20 000
Remuneration per year	R240 000	(R20 000 x 12months)
The remuneration per year of R240 000 falls within bracket B of the tax tables above, and therefore we will use this bracket for the tax calculation.
Income tax per tax tables	R45 103.74	[(R240 000 - R216 201) x 26% + R38 916]
Less: Primary rebate	R15 714.00
Total tax payable per year	R29 389.74	(R45 103.74 - R15 714)
PAYE deductible per month	R2 449.15	(R29 389.74 / 12)
Net salary payable to you	R17 550.85	(R20 000 - R2 449.15)

Example 2 - Basic salary and retirement contributions:

You receive a gross salary of R20 000 and contribute 7.5% of your salary to a retirement plan, which is deducted from your salary by your employer, per month for the tax year 1 March 2021 to 28 February 2022.

Salary per month	R20 000
Less: Retirement contribution	R1 500	(R20 000 x 7.5%)
Remuneration per month	R18 500
Remuneration per year	R222 000	(R18 500 x 12months)
The salary per year of R222 000 falls within bracket B of the tax tables above, and therefore we will use this bracket for the tax calculation.
Income tax per tax tables	R40 423.74	[(R222 000 - R216 201) x 26% + R38 916]
Less: Primary rebate	R15 714.00
Total tax payable per year	R24 709.74	(R40 423.74 - R15 714)
PAYE deductible per month	R2 059.15	(R24 709.74 / 12)
Net salary payable to you	R16 440.85	(R20 000 - R1 500 - R2 059.15)

Example 3 - Basic salary and medical aid contributions:

You receive a gross salary of R20 000 and contribute R2 000 to medical aid for three beneficiaries, which is deducted from your salary by your employer per month for the tax year 1 March 2021 to 28 February 2022.

We will be making use of the medical aid credits available that can found on this SARS website.

Salary per month	R20 000
Remuneration per year	R240 000	(R20 000 x 12months)
The salary per year of R240 000 falls within bracket B of the tax tables above, and therefore we will use this bracket for the tax calculation.
Income tax per tax tables	R45 103.74	[(R240 000 - R216 201) x 26% + R38 916]
Less: Primary rebate	R15 714.00
Less: Medical aid credits	R10 656.00	[(R332+R332+R224) x 12]
Total tax payable per year	R18 733.74	(R45 103.74 - R15 714 - R10 656)
PAYE deductible per month	R1 561.15	(R18 733.74 / 12)
Net salary payable to you	R16 438.86	(R20 000 - R2 000 - R1 561.15)

Please note that an additional medical credit is available that is not taken into account when calculating your PAYE. This credit could reduce your annual tax liability when your income tax return is submitted for the tax year, resulting in a possible refund to you.

Example 4 - Basic salary, retirement contributions and medical aid contributions:

You receive a gross salary of R20 000, contribute 7.5% of your salary to a retirement plan and R2 000 to medical aid for three beneficiaries, which are both deducted from your salary by your employer per month for the tax year 1 March 2021 to 28 February 2022.

We will be making use of the medical aid credits available that can found on this SARS website.

Salary per month	R20 000
Less: Retirement contribution	R1 500	(R20 000 x 7.5%)
Remuneration per month	R18 500
Remuneration per year	R222 000	(R18 500 x 12months)
The salary per year of R222 000 falls within bracket B of the tax tables above, and therefore we will use this bracket for the tax calculation.
Income tax per tax tables	R40 423.74	[(R222 000 - R216 201) x 26% + R38 916]
Less: Primary rebate	R15 714.00
Less: Medical aid credits	R10 656.00	[(R332+R332+R224) x 12]
Total tax payable per year	R14 053.74	(R40 423.74 - R15 714 - R10 656)
PAYE deductible per month	R1 171.15	(R14 053.74 / 12)
Net salary payable to you	R15 328.85	(R20 000 - R1 500 - R2 000 - R1 171.15)

Please note that this is only a general guide, the legislation may change at any time, and it is, therefore, advisable to refer to the SARS website for any changes.