Who has to pay it
Provisional tax applies to income SARS hasn't already taxed through PAYE: freelance and consulting income, sole proprietor profit, rental income and investment income. If your only income is a salary with PAYE already deducted by your employer, you're generally not a provisional taxpayer. Most freelancers, tradespeople and small business owners are. SARS exempts some individuals with no business income, for example where interest, dividends or rental income come to R30,000 or less, but that doesn't cover someone running a business.
Registering as a provisional taxpayer doesn't happen automatically. If your income fits the description above and SARS hasn't flagged you as one yet, you're still expected to submit IRP6 returns and pay on time. Not being registered isn't a defence against the penalties.
The two payment dates, plus an optional third
- First period: 31 August. An estimate of your full year's taxable income, with tax paid on half of it
- Second period: the last business day of February. A revised estimate for the full tax year, topping up what you paid in August
- Third period (optional): 30 September, after year-end. That's seven months after a February year-end. A voluntary top-up if your first two payments came in short, which reduces the interest you'd otherwise owe on the shortfall
You have to submit an IRP6 for both the first and second periods even if you don't owe anything for that period. A nil estimate is still a submission.
How much to estimate
You've got two starting points. The "basic amount" is your taxable income from your most recent assessment, which SARS pre-fills on the IRP6. Or you estimate your actual expected income for the current year yourself, which matters more if your income has grown or shrunk since your last assessment.
Underestimate by too much and there's a real cost. If your taxable income is R1 million or less, SARS charges a penalty of 20% of the tax shortfall when your estimate is below both 90% of your actual taxable income and your basic amount. So the basic amount works as a safe harbour at that level. Above R1 million, your estimate needs to be at least 80% of your actual taxable income, and the basic amount doesn't help. The optional third payment reduces interest, but it doesn't remove this penalty, because SARS only counts payments made by the end of the tax year.
What happens if you pay late
SARS adds a 10% penalty to a late first or second provisional payment, plus interest until it's settled. The penalty applies whether you're a day late or a month.
If you're also VAT-registered
Provisional tax and VAT are separate obligations on separate schedules. Being VAT-registered doesn't change your provisional tax dates, and vice versa. VAT is collected on your sales and paid over roughly every two months (see our VAT201 filing guide); provisional tax is paid on your profit, twice a year. Not sure whether you need to register for VAT at all? Start with the VAT registration guide.
A simple way to avoid the August surprise
The freelancers who get caught out usually aren't bad at their work, they've just spent the money before setting anything aside for tax. Our pricing guide walks through building tax into your rate from the start, rather than treating it as a bill that appears out of nowhere twice a year. A running record of your income and expenses through the year makes the August and February estimates far less of a guess, and every invoice you send is part of that record (see how to create an invoice). You can see how Invo tracks income and expenses on the features page.
Getting it right the first time
If your income mixes freelance work, a salary, and something else (rental income, a side project), get a registered tax practitioner to check your first IRP6 before you submit it. The rules around what counts as provisional income get complicated once more than one income stream is involved, and a wrong estimate in year one sets a wrong basic amount for the year after.
