Provisional Tax for Freelancers: What You Need to Know
Freelancing comes with many perks—flexibility, independence, and the ability to work on your own terms. However, one thing many freelancers don’t consider until tax season rolls around is provisional tax. If you’re working for yourself in South Africa, understanding provisional tax is essential to avoid penalties and stay on top of your tax obligations.
In this guide, we’ll break down what provisional tax is, who needs to pay it, how to calculate it, and how to ensure you remain compliant without stress.
What is Provisional Tax?
Provisional tax is a system that ensures freelancers, sole traders, and businesses who don’t have tax deducted at source (like a regular employee's PAYE) pay their income tax in advance. Instead of paying tax once a year in one large lump sum, provisional tax requires you to make payments twice a year (and sometimes a third optional payment).
This helps spread the tax burden and prevents you from facing a huge bill at the end of the tax year.
Who Needs to Pay Provisional Tax?
You need to pay provisional tax if you:
Earn income that isn’t subject to PAYE (like client invoices, side hustles, or rental income).
Are a freelancer, independent contractor, or self-employed individual earning over R95,750 per year (for those under 65, higher thresholds apply for older individuals).
Have other income streams outside of traditional employment (like investments, rental income, or foreign income).
If you only earn a salary where PAYE is already deducted, you are not required to register as a provisional taxpayer.
How Does Provisional Tax Work?
Provisional tax is paid in two main instalments throughout the year:
First payment (31 August): This is based on an estimate of your taxable income for the year.
Second payment (End of February): This adjusts for any changes in earnings and is the final tax due for the year.
Third (optional) payment (End of September): If you underpaid, you can make a voluntary third payment to avoid penalties and interest.
Your final tax return (ITR12) is then filed in the normal tax season, where SARS calculates if you owe anything further or if you are due a refund.
How to Calculate Provisional Tax
Estimate Your Taxable Income – This includes all your freelance earnings minus allowable business expenses.
Calculate Your Tax Liability – Use the SARS tax tables to determine how much tax you owe for the year.
Divide Into Two Payments – Split your estimated tax into two payments: 50% due in August and the remaining 50% in February.
Example:
If you estimate your taxable income at R300,000 for the year, your income tax might be around R45,000.
First Payment (August): R22,500
Second Payment (February): R22,500
Third (if underpaid): Adjustments based on your actual income
How to Avoid Penalties
SARS imposes penalties for underestimating and underpaying your tax. To avoid this:
Keep accurate records of income and expenses.
Use a professional tax service like Tax Now Now to help with estimates.
Pay on time (mark your calendar for the August and February deadlines).
Make a top-up payment in September if needed to avoid interest.
Deductions Freelancers Can Claim
One of the biggest perks of being a freelancer is that you can deduct business-related expenses, reducing your taxable income. Some common deductions include:
Home office expenses (if you have a dedicated workspace)
Internet and phone costs
Software subscriptions
Marketing and advertising
Professional fees (accountants, tax consultants)
Travel costs (if related to work)
Tracking and claiming these correctly can save you thousands in taxes!
How to Register for Provisional Tax
If you haven’t already registered, you can do so through SARS eFiling or get a tax professional to assist you. If you’re a freelancer, it’s best to set this up early to avoid unexpected tax bills.
Conclusion
Provisional tax might seem overwhelming at first, but with the right knowledge and planning, you can manage it smoothly. Keeping track of your income, making estimated payments on time, and claiming legitimate deductions will help you stay compliant and avoid unnecessary penalties.
Need help? Tax Now Now offers a hassle-free way to handle your provisional tax, so you can focus on growing your freelance business while staying tax compliant! Reach out today and let’s make tax season stress-free!
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Contact us: www.taxnownow.com/contact-us
Book a consultation here.
