If you earn income that is not taxed through a payslip, SARS does not wait until the end of the year to collect tax on it. Instead, you are expected to estimate your income during the year and pay tax in advance, through the provisional tax system.
Provisional tax catches many people by surprise: landlords, freelancers, consultants, business owners and investors with interest or foreign income. The penalties for paying late or estimating too low can be significant, and they are levied automatically.
The rules are also changing. A Tax Administration Laws Amendment Bill tabled in Parliament in 2026 proposes to raise a key threshold and to tighten the consequences of not paying the second instalment in full. With the second payment for the 2027 tax year due at the end of February 2027, now is a good time to check your position.
What provisional tax is
Provisional tax is not a separate tax. It is a way of paying income tax in instalments during the year, under the Fourth Schedule to the Income Tax Act 58 of 1962. At the end of the year, your return is assessed and the provisional payments are credited against your final liability.
Who must pay it
In broad terms, you are a provisional taxpayer if you earn income other than remuneration from an employer who deducts PAYE. This includes:
- individuals who run a business, trade as sole proprietors or work as independent contractors;
- individuals who earn rental income, interest, foreign income or other investment income above the exemption limits;
- companies; and
- trusts, in many cases.
An individual who does not carry on a business is generally exempt if their taxable income is below the tax threshold, or if their taxable income from interest, dividends, rental and similar sources does not exceed R30,000 for the year. If you are unsure, check with your tax practitioner, as the exemptions have specific conditions.
When payments are due
For individuals, whose tax year runs from 1 March to the end of February, the payment periods are:
- First payment: within six months of the start of the tax year, so by 31 August.
- Second payment: by the last day of the tax year, so by the end of February. Where that date falls on a weekend or public holiday, the payment is due on the last business day before it. For the 2027 tax year, that is Friday, 26 February 2027.
- Optional third payment: a voluntary top-up after year end, which can reduce or avoid interest on any shortfall.
Companies follow the same pattern, but the dates are linked to their own financial year end.
Each payment must be accompanied by an IRP6 return containing an estimate of your taxable income for the full year. Submitting an estimate and making payment are both required. One without the other does not meet your obligation.
The penalties
Late payment
If a provisional payment is not made in full by the due date, SARS imposes a penalty of 10% of the amount not paid on time. Interest is also charged on the late amount.
Underestimation
The second estimate matters most. If it is too low, SARS imposes an underestimation penalty of 20% of the shortfall between the tax on your estimate and the tax on a required minimum. The test depends on your actual taxable income:
- Taxable income of R1 million or less: your estimate must be at least 90% of your actual taxable income, or at least equal to your “basic amount”. The basic amount is broadly your taxable income on your most recent assessment, with certain adjustments.
- Taxable income above R1 million: your estimate must be at least 80% of your actual taxable income. The basic amount does not protect you.
SARS may remit the underestimation penalty, in whole or in part, if it is satisfied that the estimate was seriously calculated with due regard to the relevant factors and was not deliberately or negligently understated. Keeping a record of how you arrived at your estimate is therefore important.
What the 2026 amendments propose
Two changes in the Bill are especially relevant.
A higher threshold. The R1 million threshold would increase to R1.8 million, for years of assessment starting on or after 1 March 2026. More individual taxpayers would be able to rely on their basic amount when making their second estimate.
Payment in full on the second instalment. At present, a taxpayer who makes an accurate second estimate but pays late faces the 10% late payment penalty, but not the underestimation penalty. The Bill proposes that if the second payment is not made in full within a month of its due date, the taxpayer will be treated as having estimated only the amount actually paid. That could expose a taxpayer to the 20% underestimation penalty even if their estimate was correct. Commentators have noted that the drafting needs clarification, and the final wording may change.
These proposals are not yet law. Taxpayers should, however, plan for them now, particularly businesses with tight cash flow in February.
A practical checklist
- Confirm whether you, your company or your trust is a provisional taxpayer, and that you are registered as one.
- Diarise both payment dates, and the second payment date for your own year end if you are a company.
- Before the second payment, update your estimate using actual figures for the year to date and a realistic projection to year end.
- Keep working papers showing how you calculated your estimate.
- Pay the full amount on time, using the correct payment reference, and allow time for the payment to clear.
- If you are short of funds, speak to your adviser before the due date about your options, including a payment arrangement.
- Consider a third top-up payment if your final figures show a shortfall.
- If a penalty is imposed unfairly, request remission or lodge an objection within the time limits.
How O’Reilly Law can help
We advise individuals, businesses and trusts on their tax obligations, including provisional tax compliance and disputes with SARS. We assist with requests for penalty remission, objections and appeals under the Tax Administration Act 28 of 2011, and work alongside your accountant or tax practitioner where a matter becomes contentious.
Contact us if you have received a provisional tax penalty or want advice ahead of the February deadline.
Related reading: The SARS Voluntary Disclosure Programme: regularising your tax affairs · SARS and directors’ personal liability for company tax debt
This article is general information and not legal or tax advice. Correct as at November 2026.