Avoiding common tax pitfalls: a guide for South Africans

Many South Africans believe that if they earn below the tax threshold, R95,750 annually for those under 65 in 2026, they don’t need to file a return. This assumption is dangerously wrong.

The Income Tax Act technically places the onus on anyone earning even R1 to file a return with SA Revenue Service (Sars): “Seemingly minor financial events can unexpectedly force you to file. A savings- or two-pot withdrawal creates a second income stream that’s taxed as normal remuneration. Having more than one IRP5 generally makes filing a tax return compulsory, as Sars requires all sources of employment income to be declared and assessed together.

Other events include accruing bank interest exceeding R28,300 annually for under-65s (R34,500 for over-65s); making a profit from selling assets such as shares, unit trusts, cryptocurrency, or your primary property for over R2.5 million; and earning income from foreign dividends and rental properties.

Here are other areas that are commonly misunderstood:

1. Confirming auto-assessment: Many assume that when Sars auto-completes their tax return, it means they’re fully compliant. Even with auto-assessment, please check and confirm its accuracy. You have only until the end of the filing season, October 23, 2026, to change your 2026 assessment, starting on July 1, to confirm, and you only have these 80 days from assessment date in which to dispute or correct auto-generated errors. After this, you may start to incur late-submission penalties on outstanding amounts.
2. Checking auto-assessment: Check that all IRP5s from multiple employers, and the certificates from your medical scheme and savings vehicles, are accounted for. Additional allowable medical expenses (over and above your monthly medical scheme premium) should also be included. Check that interest earned from banks and capital gains events are reflected. Also, ensure that source codes are identical across IRP5s and Sars records.
3. Doing nothing: Penalties can be up to R1,000 per month for non-submission. Someone who paid R800 tax on a savings withdrawal could potentially get this refunded if they file. If not, they could be liable for thousands in penalties and Sars, debt.
4. Provisional Tax: Provisional tax is a system that includes non-remuneration income, which is paid in up to three advance payments in six monthly periods. Self-employed individuals must pay provisional tax, and Sars can also classify people with multiple income sources as provisional taxpayers. This means tax is paid in two instalments during the tax year instead of monthly. The first payment is based on an estimate of 50% of your expected annual tax liability, and the second ensures that, in total, you have paid about 90% of your expected tax for the year. After the person's financial year ends, a final assessment is required based on their actual income, which determines whether they need to pay a third additional or top-up payment, or receive a refund, which will be carried forward to the next tax period.

Some individuals with normal remuneration and other taxable income (earned from interest, foreign dividends, rental from letting of fixed property, and remuneration from an unregistered employer) more than R30 000 might be required to register for provisional tax and follow a different assessment requirement.

Two-pot withdrawals are taxed at marginal rates and can push you into a higher tax bracket. Spending the entire withdrawal without setting aside money for taxes can be an expensive mistake.

 Practical steps to protect yourself

Sars’ tax simulation calculators on e-filing and the Sars  Mobi App, you can test the tax implications of a lump-sum withdrawal or taking a savings withdrawal from your savings Pot, helping you to make better decisions.

It’s also a good idea to work with a financial planner or tax specialist if you’re unsure about tax, budgeting, saving, and planning.

Arnold notes that misunderstandings generally stem from complexity, not deliberate non-compliance, but the truth is that no one can afford to ignore their tax status, not even low-income earners or pensioners.

Taking action early lowers the likelihood of tax hardship and penalties, and helps prevent debt accumulation.

The 2026 tax season

• Auto Assessments: 1 July to 12 July 2026
• Non-provisional individuals: 13 July to 23 October 2026
• Provisional taxpayers: 13 July 2026 to 22 January 2027

  The ‘tax traps’ are catching ordinary South Africans off guard

* Arnold is a tax specialist at financial advisory firm NMG Benefits.

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