South Africa’s Personal Income Tax Brackets

South Africa employs a progressive income tax system, meaning that the more you earn, the higher the percentage of tax you pay on portions of your income. However, many people misunderstand this system and assume they pay a flat rate on their entire salary, which is not the case. 

How the Tax Brackets Work 

For the 2024/2025 tax year, individual income tax rates are as follows: 

• Up to R237,100 – 18% of taxable income 

• R237,101 – R370,500 – R42,678 + 26% on income above R237,100 

• R370,501 – R512,800 – R77,362 + 31% on income above R370,500 

• R512,801 – R673,000 – R121,475 + 36% on income above R512,800 

• R673,001 – R857,900 – R179,174 + 39% on income above R673,000 

• R857,901 – R1,817,000 – R251,258 + 41% on income above R857,900 

• Above R1,817,000 – R644,489 + 45% on income above R1,817,000 

When Do You Pay 45%? 

The 45% tax rate only applies to the portion of income above R1,817,000. This means that if you earn R2,000,000, only R183,000 (R2,000,000 – R1,817,000) is taxed at 45%. 

Many people say, “I pay 45% tax on my salary,” or “I pay 42% in tax,” but this is often a misunderstanding. You are taxed at different rates for different portions of your income, rather than paying one single rate on everything. 

Example: Tax on R2,000,000 Salary 

Let’s calculate the total tax due for someone earning R2,000,000: 

1. First R237,100 taxed at 18% → R42,678 

2. Next R133,400 (R237,101 – R370,500) taxed at 26% → R34,684 

3. Next R142,300 (R370,501 – R512,800) taxed at 31% → R44,113 

4. Next R160,200 (R512,801 – R673,000) taxed at 36% → R57,672 

5. Next R184,900 (R673,001 – R857,900) taxed at 39% → R72,111 

6. Next R959,100 (R857,901 – R1,817,000) taxed at 41% → R393,231 

7. Final R183,000 (R1,817,001 – R2,000,000) taxed at 45% → R82,350 

Total Tax Payable: R726,839 

What Is the Effective (Average) Tax Rate? 

Your marginal tax rate is the highest rate that applies to your income (in this case, 45%). But your average tax rate—the actual percentage of your total income paid in tax—is different. 

To calculate the average tax rate, we use: 

Total Tax Paid/Total Income×100 

=726,839/2,000,000×100 

=36.34% 

So, even though this person is in the 45% tax bracket, their actual (average) tax rate is only 36.34%. 

Common Misconceptions About Tax Rates 

Many people say, “I pay 45% tax on my salary,” but that is incorrect. The 45% rate only applies to income above R1,817,000. Similarly, someone might say, “I pay 42% in tax,” but their actual (effective) tax rate is much lower. 

• If you earn R2,000,000, your effective tax rate is 36.34%, not 45%. 

• If you earn R1,500,000, your effective tax rate is even lower. 

This is because you only gradually pay higher tax rates on portions of your income, rather than one rate on everything. 

Final Thoughts 

• South Africa uses a progressive tax system, where different portions of income are taxed at different rates. 

• The highest tax rate (45%) only applies to income above R1,817,000. 

• Your effective tax rate is always lower than your marginal tax rate. 

• People often misunderstand tax brackets and assume they pay a flat rate, which is incorrect. 

Understanding how tax works can help individuals plan their finances better and avoid unnecessary panic about “paying 45% in tax.”