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Provisional tax vs PAYE: which one applies to you?
PAYE and provisional tax are two ways of collecting the same income tax. Which one applies depends entirely on how your income reaches you — not on how much you earn or what you call yourself. This guide explains the distinction and what happens when both apply at once.
The difference in one line
PAYE is deducted by someone else before you are paid. Provisional tax is paid by you, after you are paid.
That is the whole distinction. Both feed into the same annual income tax assessment, and both are credited against the same final liability.
How PAYE works
Your employer calculates the tax on your salary each month, withholds it, and pays it to SARS on your behalf. At year end they issue an IRP5 showing what was earned and what was withheld. That certificate pre-populates your annual return.
You do nothing during the year. The system is designed so that a person with a single salary and no other income usually owes nothing extra at assessment.
How provisional tax works
Nobody withholds anything. You estimate your own taxable income for the year, calculate the tax yourself, and pay it in two instalments via an IRP6 return — the first by 31 August, the second by the last day of February.
The responsibility for getting the estimate right sits with you, and SARS penalises material underestimates at the second period.
Which one applies to you
Match your situation to the list below:
- Salaried employee, one job, no side income: PAYE only. Nothing further to do during the year.
- Independent contractor invoicing clients: provisional tax. You must register for the IRP6 tax type.
- Salaried with meaningful freelance or rental income: both. PAYE covers the salary; provisional tax covers the rest.
- Contractor working through a personal service provider arrangement: PAYE may be withheld at a flat rate by the client — check your payment advice before assuming.
When both apply
This is the common case for people building a freelance practice alongside a job. You are not taxed twice, but you do have to account for both in one calculation.
Your IRP6 estimate must cover your total taxable income for the year — salary plus freelance. You then subtract the employees' tax your employer has already paid over. What remains is the provisional tax you owe on the untaxed portion.
Because the combined income pushes you into a higher marginal bracket, the tax on the freelance portion is usually higher than people expect. Setting aside a flat 25% of side income frequently falls short.
The practical consequence
Moving from PAYE to provisional tax means moving from a system that handles tax for you to one where a missed diary date costs 10% plus interest. The arithmetic is manageable; the discipline is what catches people.
Provio exists for that transition: it keeps the estimate current as you invoice, tracks what you have set aside against what each IRP6 will need, and holds the receipts behind every deduction.
Common questions
- What is the difference between PAYE and provisional tax?
- PAYE is income tax withheld by your employer before you are paid. Provisional tax is the same income tax, but estimated and paid by you in two instalments during the year because nobody withheld it.
- Can I pay both PAYE and provisional tax?
- Yes, and many people do. If you have a salary plus freelance or rental income, PAYE covers the salary and provisional tax covers the rest. Your IRP6 estimate includes total income and deducts the PAYE already paid.
- Do I stop paying PAYE if I register for provisional tax?
- No. If you still draw a salary, your employer continues to withhold PAYE. Provisional tax applies only to the income that has no tax withheld from it.
Sources
Rates, thresholds and penalty rules change each tax year. This guide summarises published SARS guidance for general information and is not professional tax advice.