Provisional tax is not a separate tax — it is a method of paying your income tax in advance during the tax year, rather than in one lump sum after the year ends. SARS requires certain taxpayers to make these advance payments through the IRP6 submission process.
Who Is a Provisional Taxpayer?
You are a provisional taxpayer if you receive income that is not subject to PAYE (employees' tax). This includes:
- Self-employed individuals and freelancers
- Directors of private companies
- Members of close corporations
- Individuals with significant rental income, investment income, or freelance income
- Anyone whose non-salary income (interest, rental, etc.) exceeds certain thresholds
You are not a provisional taxpayer if your only income is a salary from one employer and you have no other significant income sources. Similarly, if your taxable income is below the tax threshold and you have no income from carrying on a business, you are exempt.
When Are Payments Due?
For individuals with a February year-end (the standard tax year in South Africa):
- First payment (IRP6): Due by 31 August (6 months after the start of the tax year on 1 March)
- Second payment (IRP6): Due by 28/29 February (end of the tax year)
- Third payment (voluntary top-up): Due by 30 September (7 months after the end of the tax year, when filing your IT12 return)
How to Estimate Your Taxable Income
The most challenging part of provisional tax is estimating your taxable income for the year. For the first payment, you need to estimate your income for the full year after only 6 months. For the second payment, you should have a better picture. Here are some approaches:
- Use last year's actual taxable income as a baseline and adjust for expected changes
- If your income is growing, increase the estimate by a reasonable percentage
- Include all sources: business profit, rental income, investment income, and any salary
- Remember to deduct allowable expenses and retirement fund contributions
Penalties for Under-Estimation
SARS takes under-estimation seriously. If your estimate on the second IRP6 is less than 80% of your actual taxable income, SARS will impose a penalty of 20% of the difference between the actual tax and the tax on your estimated amount.
For the first payment, the threshold is more lenient — your estimate must be a reasonable one, and SARS generally does not penalise if you make a genuine attempt to estimate accurately.
How Much to Pay
For the first payment, pay 50% of your estimated annual tax liability. For the second payment, pay the remaining amount (total estimated tax minus what you already paid). If you discover that you have under-estimated when filing your annual return, make the third voluntary top-up payment to avoid or reduce penalties and interest.
Interest on Late Payments
If you pay late, SARS charges interest at the prescribed rate (currently around 7.5% per annum). Interest runs from the due date until the date of payment. This is in addition to any under-estimation penalties.
Tips for Managing Provisional Tax
Set aside money throughout the year for provisional tax payments — a separate savings account works well. Keep good records of your income and expenses so that your estimates are as accurate as possible. Consider using an accountant for your first year as a provisional taxpayer to ensure you get the process right. And always pay on time — the interest and penalties are avoidable.
Use our provisional tax calculator to estimate your IRP6 payments based on your expected taxable income.