Before we get into any of it, there's a deadline happening right now that affects you if you have employees. Scroll to the bottom if you're in a hurry. But if you have five minutes, this is the one issue to read from the start.

We started this newsletter because we kept having the same conversations, with different people. A business owner (smart, hard-working, running a small business) would come to us in a panic about a SARS letter they'd received. Not because they'd done anything wrong but because nobody had ever sat down and explained to them how the tax system actually works.

That's what this newsletter is for. No jargon. No thousand-rand-an-hour consulting fees. Just clear, practical information you can actually use.

Let's start at the beginning.

If you run a business in South Africa, SARS expects you to deal with some combination of these four taxes. Understanding what each one is and critically, which ones apply to you, is the foundation of everything else.

1. Income tax
This is the tax on your profit. What's left after you've paid your costs. If you're a sole proprietor, your business income is taxed as part of your personal income tax return (ITR12). If you've registered a company (Pty Ltd or CC), the company pays its own income tax at a flat rate. Small business corporations (SBC) get a sliding scale that's much more generous. Filing happens once a year and you have up to the end of your next financial year to file your tax return.

2. Provisional tax
Here's where many owners get tripped up. If you earn income that isn't fully taxed at source (meaning you're not just drawing a salary) SARS requires you to estimate your tax and pay it in two instalments. First payment: end of August (Or six months of your Financial Year). Second payment: end of February (Or last month of your Financial Year). Think of it as pre-paying your income tax so you don't get a massive bill at year-end. If you're a business owner and you're not registered as a provisional taxpayer, this should be your next call to your accountant. This includes if you have rental income.

3. VAT (Value Added Tax)
VAT is 15%. You must register if your annual turnover exceeds R2.3 million (Previously R1 Million). Once registered, you charge VAT on your sales (output tax), but you can claim back VAT on your business expenses (input tax). The difference is what you pay SARS, usually every two months. The paperwork is a VAT201 return. One thing that surprises many new registrants: VAT is collected on behalf of SARS: it was never your money to begin with.

4. PAYE (Pay As You Earn)
The moment you employ someone (even one person), you become a tax collector for SARS. You must deduct income tax from your employees' salaries and pay it over to SARS every month by the 7th, along with UIF and, if applicable, SDL. The monthly return is called the EMP201. Miss it, and SARS charges a 10% penalty plus interest automatically. No warning, no grace period.

5.Bonus:

UIF (Unemployment Insurance Fund)
Both you and your employee contribute 1% of remuneration each (2% total, capped at a monthly remuneration of R17,711 from March 2023). This covers employees if they're retrenched, become ill, or go on maternity leave. It's not optional, and it's collected together with PAYE on the EMP201.

There's also the Skills Development Levy (SDL), which applies if your annual payroll exceeds R500,000. You pay 1% of total remuneration to SARS, who passes it to the SETA relevant to your industry. And if you qualify (turnover under R1 million), there's a simplified Turnover Tax regime that replaces several of the above with one small percentage. We'll cover both of those properly in a future issue.

If you employ anyone, this section is the most important thing in this issue. The EMP501 window is open right now, and it closes 31 May 2026.

What is the EMP501, in plain English?

Once a year, SARS requires every employer to submit a full reconciliation of what they paid their employees, what PAYE, UIF, and SDL was deducted, and what was actually paid over to SARS during the year. This is the EMP501. It covers the tax year that just ended - 1 March 2025 to 28 February 2026.

Along with the EMP501, you generate IRP5 certificates for each employee — these are the documents your staff need to complete their own tax returns later in the year. If you submit late, or with errors, your employees may have problems filing their returns. SARS may also reject your submission entirely if employee Income Tax Reference Numbers are missing: this is a new, strictly enforced rule for the 2026 season.

You submit through e@syFile™ Employer (free software from SARS) or eFiling if you have fewer than 50 employees. Download the latest version from sars.gov.za before you start as an outdated version may produce a file SARS won't accept.

Practically, here's what you need to do in the next few weeks:

Log into your SARS eFiling account at efiling.sars.gov.za and check your dashboard. Look for any outstanding returns or debt listed under your tax types. Specifically check: Income Tax, PAYE, and VAT. If anything shows as outstanding, don't ignore it — each outstanding return generates an automatic penalty of between R250 and R16,000 per month depending on taxable income, compounding until it's resolved. It takes about ten minutes and could save you a significant amount.

That's it for Issue #1. Next month we'll go deeper into provisional tax — who qualifies, how to calculate your payment, and what happens if you underestimate. It's the area that causes the most unexpected tax bills for growing businesses, and there's a way to manage it properly.

If you found this useful, forward it to one other business owner. That's all we ask.

Until next month.