Calculating PAYE on Irregular Income
This help page provides an explanation and examples of the calculation of PAYE where an employee earns both regular and irregular income.
Scope and terminology
- The term "income" is used on this page to refer to the employee's taxable income (remuneration for PAYE purposes).
- These methods will be discussed with reference to monthly-paid employees, but the principles are the same for employees who are paid weekly, etc.
Calculating PAYE on Irregular Income¶
There are two types of income: regular and irregular. Regular income is anything that is paid at regular intervals, such as salaries and commission; irregular income is anything that isn't regular, such as an annual bonus. The total PAYE due for a period is calculated as:
Total PAYE = PAYE on regular income + PAYE on irregular income
For more information on Calculating PAYE on regular income, please read our help page here.
PAYE on irregular income is calculated as the difference between tax on an employee's regular income and tax on their total income. It can be broken down as follows:
Step 1: Calculate the projected total income for the year¶
This is calculated as the sum of the annual equivalent for regular income and the total irregular income.
Step 2: Calculate the tax on the projected total income for the year¶
Use the tax tables to determine the tax that would be paid if the employee earns the projected total income for the year
Step 3: Calculate the tax on the irregular income¶
This is calculated as the difference between the tax on the projected total income and the tax on the annual equivalent.
Example: Calculating Tax on Irregular Income¶
An employee earns a sign-on bonus of R 20,000. Their annual equivalent is R 120,000, and the annual tax liability on the annual equivalent is R 21,600. The 2022 tax table here applies.
| Step | Workings |
|---|---|
| Step 1: Calculate the projected total income for the year |
120,000 + 20,000 = 140,000 |
| Step 2: Calculate the tax on the projected total income for the year |
140,000 × 18% = 25,200 |
| Step 3: Calculate the tax on the irregular income |
25,200 – 21,600 = 3,600 |
Integrated Example: Calculating PAYE with Regular and Irregular Income¶
Suppose that an employee earns a basic salary of R 14,000, R 12,000, and R 14,000 in March, April, and May, respectively, of 2022. They also receive a bonus of R 28,000 in May 2022.
Regular income¶
| Step | March | April | May |
|---|---|---|---|
| Step 1: Calculate the YTD income |
14,000 | 14,000 + 12,000 = 26,000 | 14,000 + 12,000 + 14,000 = 40,000 |
| Step 2: Calculate the annual equivalent |
(14,000 ÷ 1) × 12 = 168,000 | 26,000 × 12 ÷ 2 = 156,000 | 40,000 × 12 ÷ 3 = 160,000 |
| Step 3: Calculate the tax on the annual equivalent |
168,000 × 18% = 30,240 | 156,000 × 18% = 28,080 | 160,000 × 18% = 28,800 |
| Step 4: Calculate the projected annual tax liability |
30,240 – 16,425 = 13,815 | 28,080 – 16,425 = 11,655 | 28,800 – 16,425 = 12,375 |
| Step 5: De-annualise the tax liability |
13,815 ÷ 12 × 1 = 1,151.25 | 11,655 ÷ 12 × 2 = 1,942.50 | 12,375 ÷ 12 × 3 = 3,093.75 |
| Step 6: Calculate the PAYE due |
1,151.25 – 0 = 1,151.25 | 1,942.50 – 1,151.25 = 791.25 | 3,093.75 – 1,151.25 – 791.25 = 1,151.25 |
Irregular income¶
| Step | March | April | May |
|---|---|---|---|
| Step 1: Calculate the projected total income for the year |
– | – | 160,000 + 28,000 = 188,000 |
| Step 2: Calculate the tax on the projected total income of the year |
– | – | 188,000 × 18% = 33,840 |
| Step 3: Calculate the tax on the irregular income |
– | – | 33,840 – 28,800 = 5,040 |
| Total PAYE due for the month | 1,151.25 | 791.25 | 1,151.25 + 5,040 = 6,191.25 |