2026/2027 Tax Year: Key Payroll Changes SA Employers Must Act On
The 2026/2027 tax year started on 1 March 2026, and with it came a set of payroll changes that every South African employer needs to have implemented already. If your payroll team is still running March and April salaries on 2025/2026 figures, your PAYE calculations are wrong, and so is every payslip you have issued since then.
This post covers the specific numbers that changed, what they mean for your monthly payroll run, and what you should be checking right now.
What the 2026 National Budget Changed for Payroll
The National Budget was delivered on 25 February 2026. The headline news for employers: PAYE brackets were adjusted by approximately 3.3% for inflation, which means the government did not raise income tax in real terms. Workers whose salaries grew in line with inflation will not see a larger portion of their pay go to SARS simply because of bracket creep. That is worth noting because it did not happen automatically. It was a deliberate policy decision.
Here are the updated income tax brackets effective 1 March 2026:
| Taxable Income | Rate |
|---|---|
| R1 to R245,100 | 18% of taxable income |
| R245,101 to R383,100 | R44,118 + 26% above R245,100 |
| R383,101 to R530,200 | R79,998 + 31% above R383,100 |
| R530,201 to R695,800 | R125,599 + 36% above R530,200 |
| R695,801 to R887,000 | R185,215 + 39% above R695,800 |
| R887,001 to R1,878,600 | R259,783 + 41% above R887,000 |
| R1,878,601 and above | R666,339 + 45% above R1,878,600 |
The primary rebate increased from R17,235 to R17,820. The secondary rebate (employees 65 and older) is now R9,765, and the tertiary rebate (75 and older) is R3,249.
The tax thresholds (the income levels below which no PAYE is payable) also moved:
| Age Group | 2026/2027 Threshold |
|---|---|
| Under 65 | R99,000 |
| 65 to 74 | R153,250 |
| 75 and above | R171,300 |
Medical scheme fee tax credits increased from R364 to R376 per month for the main member and first dependant, and from R246 to R253 for each additional dependant.
If you are processing payroll manually or on a system that requires manual tax table updates, every one of these figures needs to be in your system before you run another salary.
UIF: What Changed in January 2026
The UIF changes that took effect from January 2026 are separate from the March tax year update, but they are worth confirming in the same breath because some employers missed the implementation date.
The contribution rate structure was revised to align with updated income thresholds and fund sustainability requirements. Contribution rates remain at 1% for the employee and 1% for the employer, but the earnings ceiling against which contributions are calculated was updated. Employers using a cloud-based payroll platform like PaySpace had these changes applied automatically. If you are still on a desktop system or a spreadsheet, you need to confirm that your UIF ceiling figures are correct for every employee whose remuneration exceeds the old ceiling.
Incorrect UIF deductions trigger penalties from the Department of Employment and Labour in the same way that incorrect PAYE triggers SARS interest. The fact that the change happened in January means that if your system was not updated at the time, you may have several months of incorrect contributions to correct, which requires a proactive conversation with your payroll provider before the situation compounds.
One More Change Worth Your Attention: Retirement Fund Deductions
The retirement fund contribution deduction limit increased significantly for the 2026/2027 year, from R350,000 to R430,000 per annum. For most employees in the 50-250 headcount range, this limit rarely comes into play. But for directors, senior executives, or any employee making large pension fund contributions, this change directly affects their net PAYE calculation. If you have high earners on your books, confirm with your payroll team that their retirement fund deduction has been recalculated against the new ceiling.
What You Should Do Right Now
The 2026/2027 tax year changes are not optional updates to schedule for later. PAYE calculated on the wrong figures is incorrect from the moment the first March payslip was issued. Here is what needs to happen:
First, confirm with whoever runs your payroll that they have implemented the updated tax brackets and rebates. Ask to see a sample PAYE calculation on a mid-range salary (say R45,000 per month) and check it against the new tables. If the numbers do not match, the system has not been updated.
Second, request a review of your UIF deductions for January through March. If your system was not updated in January, you may have a correction to file with the UIF.
Third, if you have any employees earning enough to make significant retirement fund contributions, ask for a specific check on those employees' PAYE calculations against the new R430,000 deduction ceiling.
Finally, review your March and April EMP201 submissions. If PAYE was calculated on incorrect figures, your EMP201 declaration will also be incorrect, and that creates a reconciliation problem at year-end. It is significantly easier to correct this now than to unravel it during your EMP501 reconciliation in August.
When Payroll Runs Itself
All of the above is exactly the kind of operational detail that consumes HR and finance teams during the first quarter of each tax year. Confirming tax tables, chasing payroll system providers for updates, cross-checking UIF figures against new ceilings. It is high-stakes administrative work that does not generate revenue but absolutely cannot go wrong.
Outsourced payroll through a provider running PaySpace means these updates happen before your first salary run of the new tax year, not after. SARS tax table updates, UIF ceiling changes, rebate adjustments: all applied automatically as part of the platform's legislative update cycle. Your payroll team does not chase the changes; the platform absorbs them.
If you are spending meaningful time on tax year compliance checks right now, it is a fair question to ask whether that time is better invested elsewhere in your business.
Key Takeaways
- PAYE brackets were adjusted by 3.3% for inflation from 1 March 2026. New tables must be in your payroll system now.
- The primary rebate is R17,820; tax-free thresholds are R99,000 (under 65), R153,250 (65 to 74), and R171,300 (75+).
- Medical scheme fee tax credits increased to R376 per month for the main member.
- UIF contribution ceilings changed from January 2026. Confirm your system was updated at the time.
- The retirement fund contribution deduction limit increased to R430,000, relevant for high earners on your payroll.
- If March or April EMP201 submissions were filed on incorrect figures, correct them before August's EMP501 reconciliation window.
Running payroll on the right figures from day one of the tax year is not a nice-to-have. If you want to confirm that your payroll compliance is where it needs to be for 2026/2027, talk to the Talentide team. No obligations, just a straight conversation.