A Guide to PAYE for Business Owners

If you earn a salary, you are required to pay income tax. As a business owner who employs staff, including yourself, you also have the responsibility of deducting tax from their salaries and remitting it to the South African Revenue Service (SARS) on a monthly basis. At Hippo, we understand the intricacies of tax obligations, and that's why we have partnered with TTT to provide comprehensive tax services. With our expertise and support, you can ensure proper tax deductions and compliance, allowing you to focus on running your business effectively.

What is PAYE?

PAYE stands for 'Pay-As-You-Earn'. It's a form of tax withheld from the taxable income of an employee, based on how much they earn. An employer is required by law to calculate income tax then deduct it from an employee's taxable salary or wages and pay it over to Sars. PAYE is a way for Sars to ensure that money is paid on a monthly basis, rather than demanding anywhere between 18 and 45% of an employee's income in a lump sum at the end of the year (yikes!). PAYE must be paid within seven days of the end of the month during which the amount was deducted.

Who has to pay PAYE?

The deducted amount of income tax is calculated based on a tax table compiled by Sars and calculated alongside their fringe benefits, such as travel allowances, pension and medical aid contributions. The amounts deducted must be paid by the employer by completing the Monthly Employer Return (EMP201). It is a payment return document in which the employer declares the total payment of all employees' salaries, together with the allocations for PAYE tax, SDL (Skills Development Levy) and UIF (Unemployment Insurance Fund). A unique Payment Reference Number (PRN) will be pre-populated on the EMP201 and will be used to link the actual payment with the relevant EMP201 payment declaration.

Register your company for PAYE with SARS

How do I pay PAYE?

The payment process can be initiated on the Sars eFiling platform after completing and submitting the month's EMP201 and can be completed via online banking. Most business banking suites offer a specific section for Sars payments, with the payment instruction sent to the bank by Sars and then confirmed and paid by the employer.

When do I need to register my business for PAYE?

An employer must register with Sars within 21 business days of becoming an employer, unless none of the employees are liable for normal tax. All employees that earn a salary above the threshold and work more than 24 hours a month are liable for normal tax.

To register for PAYE on eFiling, you will need to have registered your business with Sars — which means you must also have a business banking account and CIPC documentation.

An employer who is registered with Sars for PAYE and SDL also needs to register with Sars for the payment of UIF contributions — and will also need to register for UIF with the Department of Labour.

Hassle-free PAYE

We can help get your company registered for PAYE with SARS. It costs R650 and involves a 2 day turnaround from activation of your e-filing profile.

You will need:

  • A registered company
  • A business bank account
  • Decision on whether to register for SDL (required if salaries exceed R500k per year)
  • Certified copies of the director's/directors' IDs
Hassle-free PAYE

Making it official

Skipping the PAYE registration process is a bit like playing hide-and-seek with the government. It might be fun while it lasts but it's really only a matter of time before they find you. So, gather your paperwork and follow our easy step-by-step guide on how to register your business for PAYE tax and enjoy the peace of mind that comes with knowing your business is on solid footing with Sars.

Other business services you may need

Do you need help getting to grips with the financial statements involved in running a business? Read our easy-to-understand breakdown of the four main types of financial statements.

Are you wondering what a Tax Clearance Certificate is and why you need one? We answer those questions and give you a step-by-step guide to requesting one online.

A guide to VAT: what it is and why you need to register your company for VAT. 

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