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Tax Tips for Small Businesses

Tax Tips for Small Businesses: A Guide

The South Africa tax season starts on 01 March 2023. 

If you’re operating as a business or are self-employed, it’s important to register as a taxpayer with the South African Revenue Service (SARS). This ensures that you or your company can pay any tax owed as well as receive business benefits. As you approach tax season there are a few key steps that will help. 

When and How to File 

Filing and paying tax correctly and on time is a necessary part of running any business. But many small business owners have questions about how and when to file. Different types of tax have different requirements:

Income tax is paid annually. Individuals and sole traders complete an individual tax return (ITR12) to do this. Companies need to file a company tax return (ITR14). Income tax is a ‘backward looking’ tax, covering the previous tax year.

Provisional tax is paid in two installments, and aims to ‘smooth’ tax payments for companies and sole traders, so they are not left with one large bill at the ed of the year. A provisinonal tax payment is as the name suggests. It is a provision on the income tax that you would pay at year-end and is calculated on your estimated annual taxable income, or simply put, your profit.

The first provisional tax payment must be made within six months of the start of the year of assessment. For years of assessment starting March, this will be 31 August. During the first period, you will pay half of the total estimated tax for the full year.

The second payment must be made no later than the last working day of the year of assessment. This will be 28/29 February. The second period covers the total estimated tax for the full year, less the amount paid for the first period. You must make sure that you pay between 80 to 90 percent of your income tax over the specific Tax Year to avoid hefty penalties and interest. And if the payment for either the first or second payment is even a day late, you will be charged with an immediate 10% penalty and interest. 

Employees’ tax is paid on a monthly basis by an employer who deducts employees’ tax (PAYE) from the earnings of employees and pays it over to SARS. This is done by completing an EMP 101 form and submitting it to SARS. Once registered, an employer will receive a monthly EMP 201 return to complete with the payment of employees’ tax. The remuneration of directors of private companies is subject to employees’ tax.

Turnover Tax: Relief for micro businesses

All of this may seem a little complicated for new business owners.

Turnover Tax is a simplified tax system for small businesses with a turnover of up to R1 million per annum. It is based on the turnover of a business and is available to sole proprietors (individuals), partnerships, close corporations, companies and co-operatives.

Turnover Tax is a substitute for VAT, Provisional Tax, Income Tax, Capital Gains Tax and Secondary Tax on Companies. So qualifying businesses pay a single tax instead of five other taxes. It’s elective – so you choose whether to participate.

There are three payment dates:

  1. In the middle of the tax year on the last business day of August.
  2. At the end of the tax year on the last business day of February.
  3. After the annual TT03 – Turnover Tax Return is submitted and processed - in line with the submission of the annual income tax returns, between 1 July and 31 January of the following year.

How to Complete and File your Tax Return?

Tax payers have a number of options when completing their returns.

Many small business owners choose to use e-filing, SARS online filing portal, and complete their returns themselves. It is also possible to receive telephonic assistance, or go to a branch and have an agent help you with your form.

Larger businesses may use the services of a qualified accountant.

Learn more about filing your own business tax

What is the tax rate?

In South Africa, you are liable to pay income tax if you earn more than R95 750 and you are younger than 65 years. The amount you earn impacts your tax rate: 

2022/2023 2023/2024
Taxable income (R) Rate of Tax Taxable income (R) Rate of Tax
R0 - R226 000 18% of each R1 R0 - R237 100 18% of each R1
R226 001 - R353 100 R40 680 + 26% Above R226 000 R237 101 - R370 500 R42 678 + 26% above R237 100
R353 101 - R488 700 R73 726 + 31% Above R353 100 R370 501 - R512 800 R77 362 + 31% above R370 500
R488 701 - R641 400 R115 762 + 36% Above R488 700 R512 801 - R673 000 R121 475 + 36% above R512 800
R641 401 - R817 600 R170 734 + 39% Above R641 400 R673 001 - R857 900 R179 147 + 39% above R673 000
R817 601 - R731 600 R239 452 + 41% Above R817 600 R857 901 - R1 817 000 R251 258 + 41% above R857 900
R1 731 601 and above R614 192 + 45% Above R1 731 600 R1 817 001 and above R644 489 + 45% above R1 817 000

More on SARS Tax Brackets & Tax Tables.

All companies registered under the ordinary small business tax system are required to pay tax using the provisional tax method, which spreads out the tax liability over the assessment period. This system requires at least two amounts to be paid in advance, and calculating what you owe is crucial to making sure you’re not left with a large bill at the end of the year. Find out how much small businesses pay in taxes.

View SARS Tax Brackets & Tax Tables for 2023-2024

How to File your Tax Return: step by step

1. Gather all your tax and financial documents

To make filing quicker and more accurate, you’ll want to gather all the supporting documents before you get started. These include receipts and documentation for business-related purchases such as tax compliant invoices, as well as all sources of income. QuickBooks can help you track your business transactions in one place - simplifying record keeping for tax time. 

You can also view our How to file your own Business Tax here.

Top documents to keep:

  • Bank statements
  • Sale invoices
  • Supplier invoices
  • Invoices of Assets purchased
  • Loan agreement schedules
  • Debtors Lists
  • Creditors Lists

2. Don’t miss out on deductions

There are plenty of upsides that come with running a business. When it comes to taxes, one of the biggest perks is being able to reduce your taxable income, and therefore your tax bill by deducting legitimate business expenses through SARS registration. We’ve put together a list of possible business expenses to help you capture all possible deductions when submitting tax in South Africa in our resources on SARS deductible business expenses and self employed expenses.

3. Get help if you need it

Use technology to make your life easier:

Online accounting software like QuickBooks makes it easier to keep track of your business and stay on top of tax obligations. QuickBooks automates many of the manual tasks small business owners have to do - like tracking and reconciling expenses, and managing cash flow. This can help save you a ton of time - and possibly money that could be better spent on the important things. It also integrates with other apps you may already be using to run your business (like Shopify or Square) so you can see your business transactions all in one place. 

Work with a tax professional:

As a small business owner you often have to do it all, leaving you with little time to find answers to questions. It can help to find a trusted accounting professional to guide you through tax time. They are up to date on the current policies and requirements and can often help you uncover deductions you may not have thought about. 

Find a QuickBooks certified professional accountant near you. 

Use Accounting Software to make tax time easier

If you’re looking for “an easier way to do this” get started with QuickBooks today and set yourself up for the year to come. 

More information for Small Businesses from SARS can be found on the SARS website.

Get Tax Ready with QuickBooks Accounting Software for Small Businesses

70% of customers say QuickBooks found them tax deductions that they wouldn't have found on their own.*

Reviewed by Nadine Augustine

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