The PAYE calculation
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Video Overview

Salaried and waged employees all pay a prepaid tax called Pay As You Earn, or PAYE. Their employers are responsible for calculating the PAYE, deducting it from their pay, and then paying it over to the SARS on behalf of the employees. The PAYE deduction on the payslip is calculated using PAYE remuneration, converting it to an annual equivalent, and then based on this annual amount calculating the annual tax liability based on the current year’s tax tables and rebates. This annual amount is then converted back to a monthly or weekly amount, whichever is relevant. SARS has made this process easier by publishing monthly and weekly tax tables. At the tax year end, which is the last day of February for individuals, the PAYE is reconciled to and compared with the tax liability calculated on the tax return for individuals. The individual taxpayer will either have to pay additional tax to SARS, because the annual tax liability exceeds the prepaid taxes, or the individual will receive a refund from SARS, because the prepaid taxes exceed the tax liability at the year-end according to the ITR12 return. In this tutorial we will focus on the PAYE calculation.