"I got a raise, but I'm taking home less because it pushed me into a higher tax bracket." You've heard someone say this. It might even be you. The good news: it's almost certainly not true — but understanding why requires knowing how South Africa's progressive tax system actually works.
The Seven SARS Tax Brackets (2026/27)
For the tax year ending 28 February 2025, SARS applies the following brackets to taxable income (salary + bonuses minus approved deductions like retirement contributions):
| Taxable Income | Rate | Tax on this slice |
|---|---|---|
| R1 – R245,100 | 18% | R42,678 max |
| R237,101 – R370,500 | 26% | R34,684 max |
| R370,501 – R512,800 | 31% | R44,119 max |
| R512,801 – R673,000 | 36% | R57,672 max |
| R673,001 – R857,900 | 39% | R72,111 max |
| R887,001 – R1,878,600 | 41% | R393,249 max |
| R1,817,001+ | 45% | No cap |
Key principle: Each bracket rate applies only to the income within that bracket — not to your entire salary. This is what "progressive" means.
Marginal Rate vs. Effective Rate
Marginal rate = the rate applied to your last rand of income. If you earn R370,501, your marginal rate just tipped into 31%.
Effective rate = what percentage of your total income goes to PAYE. This is always lower than your marginal rate.
Example: R360,000 annual income (R30,000/month):
- First R245,100 taxed at 18% = R44,118
- Remaining R122,900 taxed at 26% = R31,954
- Total tax before rebate: R74,632
- Less primary rebate: –R17,820
- Tax payable: R57,397/year (R4,783/month)
- Effective rate: 15.9% — NOT the 26% marginal rate
Rebates: The Tax You Don't Actually Pay
Rebates are subtracted directly from your tax bill (not your income). SARS provides three age-based rebates for 2026/27:
- Primary Rebate: R17,820 — for all taxpayers under 65
- Secondary Rebate: R9,765 (additional) — for taxpayers aged 65 and over
- Tertiary Rebate: R3,249 (additional) — for taxpayers aged 75 and over
The tax threshold is the income at which the rebate offsets all tax liability. For 2026/27:
- Under 65: R99,000 — no PAYE below this income
- Age 65–74: R153,250
- Age 75+: R171,300
Medical Aid Credits
Medical Aid Tax Credits (MTC) reduce your PAYE liability directly:
- Main member: R376/month
- First dependant: R376/month
- Each additional dependant: R254/month
A family of four (main member + 3 dependants) saves R4,368/year in PAYE through medical aid credits — provided their medical aid contributions are to a registered scheme.
Busting the "Bonus Bracket" Myth
"My annual bonus pushed me into a higher bracket, so I'm worse off."
This cannot happen in a progressive tax system. Here's why: only the portion of your bonus that falls into the higher bracket is taxed at the higher rate. Every rand below the bracket threshold is still taxed at the lower rates.
Example: You earn R370,500 (top of the 26% bracket). You receive a R10,000 bonus:
- R10,000 enters the 31% bracket
- Tax on the bonus: R3,100
- Net bonus in your pocket: R6,900
- Every rand of your base salary is still taxed at the same rates as before
You always take home more after a bonus. The higher marginal rate only applies to the incremental income, not your whole salary.
Retirement Contributions: Your Best Tax Reducer
Contributions to an approved retirement fund (pension, provident, RA) are deductible before calculating taxable income — up to 27.5% of the higher of remuneration or taxable income, capped at R350,000/year.
If you earn R480,000/year and contribute R66,000 (13.75%) to your RA, your taxable income drops to R414,000. That saves you approximately R18,480 in PAYE — a direct, legal, SARS-approved tax reduction.
Want to see exactly what your PAYE comes to — and what you could save with retirement contributions? Use the BleedRate tax calculator to enter your figures and get a personalised breakdown.