How SARS taxes a sole proprietor
A sole proprietor and the business are the same taxpayer. There is no separate business tax return and no company tax: your profit for the year, meaning income less deductible expenses, goes onto your own ITR12 and is added to any salary, interest or rent. The total is taxed on the same 2026/2027 tables as everyone else, with the same rebates. Because no client deducts PAYE from your invoices, SARS collects the tax during the year through provisional tax.
The calculator works out profit, deducts retirement annuity contributions within the 27.5% limit, applies the tables, rebates and medical credits, and then subtracts any PAYE you paid on a salary. What is left is the tax the freelance work has to fund, spread over twelve months.
Worked example: a designer billing R45,000 a month
Ayanda is a 31-year-old graphic designer working for herself. She invoices R45,000 a month, spends R6,000 a month on software, a co-working desk and her accountant, and pays R2,500 a month into a retirement annuity.
- Profit for the year: R540,000 less R72,000 = R468,000
- Less the annuity of R30,000: taxable income of R438,000
- Tax from the 2026/2027 tables, less the primary rebate: R79,197.00
- Effective rate 18.1%; marginal rate 31%
Ayanda should move R6,599.75 into a separate account every month. That covers an August provisional payment of R39,598.50 and a February payment of R39,598.50. Note the difference between the two rates: on average she pays 18% of taxable income, but a new client worth an extra R10,000 of profit costs her R3,100 in tax.
How much to set aside at different profit levels
Monthly profit after expenses, for someone under 65 with no salary, no annuity and no medical aid, on the 2026/2027 tables.
| Profit per month | Tax for the year | Set aside per month | Share of profit | Marginal rate |
|---|---|---|---|---|
| R15,000 | R14,580 | R1,215 | 8.1% | 18% |
| R25,000 | R40,572 | R3,381 | 13.5% | 26% |
| R40,000 | R92,217 | R7,685 | 19.2% | 31% |
| R60,000 | R176,833 | R14,736 | 24.6% | 39% |
| R90,000 | R321,093 | R26,758 | 29.7% | 41% |
| R130,000 | R517,893 | R43,158 | 33.2% | 41% |
Expenses a freelancer can deduct
An expense is deductible if you incurred it in producing your income, it is not of a capital nature and it is not private. In practice that covers:
- software, hosting and subscriptions you use for client work;
- accounting and bookkeeping fees, bank charges on the business account and professional body fees;
- the business share of cellphone and internet costs;
- business travel, worked out from a logbook;
- equipment such as a laptop or camera, claimed as wear-and-tear over its useful life;
- a home office, if a room is specifically equipped and used regularly and exclusively for the business. The home office tax calculator applies the floor area method.
Freelancers have more room here than employees. Section 23(m) of the Income Tax Act stops most salaried employees from deducting things like phone and stationery costs, but it applies only to employment income. SARS generally expects records to be kept for five years from the date you submit the return, so file every invoice and receipt, and run business money through its own account so the deductions are easy to prove.
Freelance income on top of a salary
A side income is taxed at the top of your other income, so its rate is your marginal rate, not your average one. A salaried employee on R30,000 a month whose payroll deducts the correct PAYE, and who earns another R8,000 a month freelancing, owes about R28,605.00 more for 2026/2027: 30% of the side income. That amount is not collected by payroll, so it has to go through provisional tax or come as a bill on assessment with interest added. Enter your salary and PAYE in the optional section above to see your own figure.
Provisional tax for freelancers
Business income of any size makes you a provisional taxpayer. You submit an IRP6 estimate and pay half the year's tax by the end of August, and the balance by the end of February, with an optional top-up after year end to cut interest. The August and February figures in the results above use that split. For the full calculation, including the basic amount and the penalty on a low estimate, use the provisional tax calculator.
VAT: when registration becomes compulsory
From 1 April 2026 you must register for VAT when your taxable supplies in any 12-month period exceed, or are likely to exceed, R2.3 million. The previous threshold was R1 million. You have 21 business days from the date you cross it to apply. Voluntary registration is possible once supplies in the past 12 months exceed R120,000. Once registered, the VAT you charge clients belongs to SARS and is not part of your income, which is why the calculator asks for income excluding VAT. The VAT registration checker walks through the tests.
UIF does not cover your own freelance income
The Unemployment Insurance Act defines an employee as someone paid for services rendered, but excludes an independent contractor. Freelance fees therefore carry no UIF contribution, and you build up no UIF credits from them. If you also have a job, UIF on that salary is unaffected, and so is your employer's duty to deduct it.
Frequently asked questions
How much of each invoice should a freelancer put aside for tax?
It depends on your profit, not your turnover. At R45,000 a month invoiced with R6,000 of expenses and a R2,500 retirement annuity, the tax for 2026/2027 is about 17% of profit, or R6,600 a month. Use the calculator with your own figures and move that amount to a separate savings account each time a client pays.
Do freelancers pay UIF?
Not on their own freelance income. The Unemployment Insurance Act defines an employee as someone paid for services but excludes an independent contractor, so a sole proprietor does not contribute UIF on business income and cannot claim UIF benefits on the strength of it. UIF still applies to any salary you earn from an employer.
Is a sole proprietor taxed differently from an employee?
The tax tables, rebates and medical credits are the same. The differences are in timing and deductions: nobody withholds PAYE from your fees, so you pay through provisional tax, and you can deduct business expenses that the Income Tax Act blocks for most salaried employees.
When must I register for VAT as a freelancer?
Registration is compulsory once taxable supplies in any 12-month period exceed, or are likely to exceed, R2.3 million, a threshold that applies from 1 April 2026. You must apply within 21 business days. You may register voluntarily once supplies in the past 12 months exceed R120,000.
Can I deduct my laptop?
Not in one go. A laptop is a capital asset, so the cost is claimed as a wear-and-tear allowance over its useful life, for the part of its use that is for your business. Software subscriptions, by contrast, are usually ordinary running expenses and deductible in the year you pay them.
I have a full-time job and freelance on weekends. What do I owe?
PAYE on your salary covers the salary. The freelance profit is added on top and taxed at your marginal rate. With a R30,000 monthly salary and R8,000 a month of side income, the extra tax for 2026/2027 is about R28,605 for the year, and you need to register as a provisional taxpayer.
Should I open a company instead?
A Pty Ltd pays company tax on its profit, and dividends you take out are then subject to dividends tax. A salary from the company is deductible to it but taxed in your hands through PAYE, so a company is not automatically cheaper. It changes your admin, too: annual returns, payroll for yourself and separate books. Compare both before deciding, using the salary versus dividend calculator for the company side.