Small Business Tax in South Africa: What You Actually Pay
Understand small business tax in South Africa, including company tax, SBC rates, turnover tax, provisional tax and key 2026/2027 thresholds.
Table of Contents
- Introduction
- How small business tax works in South Africa
- Sole proprietor vs company: how you're taxed differently
- The main types of small business tax
- Income tax and the small business corporation (SBC) rates
- Turnover tax for very small businesses
- Provisional tax: paying in advance
- Small business tax rates and thresholds for this year
- Registering and filing without the panic
- Records you should keep all year
- Staying on top of your small business tax
Tax season has a way of making even confident business owners feel uncertain. Am I registered for the right type of tax? Am I paying the right amount? Do I even owe tax this year? These are questions a lot of South African small business owners ask - but the answers might be simpler than you think they are!
This guide breaks down small business tax in South Africa in plain language: what the main tax types are, who they apply to, and what the current rates look like in rands. It's not tax advice - if your situation is complex, a registered tax practitioner is worth the fee - but it will give you a clearer picture of where you stand.
How small business tax works in South Africa
Not every small business pays the same tax - and that's actually good news. How much you pay depends on how your business is set up and how much you earn. Once you know which category you fall into, the rest starts to make sense.
Sole proprietor vs company: how you're taxed differently
If you run your business as a sole proprietor (in your own name, without registering a separate company), your business income is added to your personal income and taxed at your individual income tax rate. You file as an individual with SARS, not as a business.
If you've registered a company - a Pty (Ltd) or close corporation - your company pays its own tax separately from you. The good news is that qualifying small businesses can pay a lot less than the standard rate, through two systems designed specifically for smaller operations: the Small Business Corporation (SBC) rates and Turnover Tax. We'll cover both below.
The main types of small business tax
Income tax and the small business corporation (SBC) rates
All registered companies in South Africa pay income tax on their profits. The standard rate is a flat 27% on taxable income - but if your company qualifies as a Small Business Corporation, the more you earn, the more you pay - but the rates are much lower than the standard 27%.
Small business corporation tax applies to companies that meet all of the following:
- All shareholders are individuals (not trusts or other companies)
- Annual gross income is no more than R20 million
- The company is not a personal services provider (a business where the owner is essentially selling their own skills directly, like a consultant or contractor)
- The company is not a holding company (a company that mainly owns shares in other companies)
If your company qualifies, the SBC rates for the 2026/2027 tax year are:
| Taxable income | Rate |
|---|---|
| R0 to R99,000 | 0% |
| R99,001 to R365,000 | 7% above R99,000 |
| R365,001 to R550,000 | R18,620 plus 21% above R365,000 |
| R550,001 and above | R57,470 plus 27% above R550,000 |
That means a qualifying company can earn up to R99,000 in taxable profit and pay nothing. Compare that to the flat 27% a non-qualifying company would pay on the same amount - that's a saving of R26,730 on the first bracket alone!
Turnover tax for very small businesses
If your business earns less than R2.3 million a year, you might qualify for turnover tax. It's a simpler way to pay tax - instead of working out your profit and paying tax on that, you just pay a small percentage of everything your business earns.
One thing to know: because you pay tax on what comes in rather than what you keep, you can't deduct your business costs like rent, stock, or equipment. So if your costs are high, it's worth checking whether standard income tax would actually cost you less.
Turnover tax is also not for everyone. You won't qualify if more than 20% of what your business earns comes from professional services like consulting, investments, or rental income. And if any of your shareholders are companies or trusts rather than individuals, you won't qualify either.
The threshold to qualify recently went up from R1 million to R2.3 million in April 2026 - the first change since the system started in 2009. So if you didn't qualify before, it might be worth checking again.
The 2026/2027 turnover tax rates are:
| Annual turnover | Rate |
|---|---|
| R0 to R600,000 | 0% |
| R600,001 to R950,000 | 1% above R600,000 |
| R950,001 to R1,400,000 | R3,500 plus 2% above R950,000 |
| R1,400,001 to R2,300,000 | R12,500 plus 3% above R1,400,000 |
Provisional tax: paying in advance
Provisional tax isn't a separate type of tax - it's just a way of paying your income tax in smaller amounts through the year, instead of one big payment at the end.
If you run a company or earn business income as a sole proprietor, you're most likely a provisional taxpayer. SARS asks you to estimate what you'll earn for the year and make two payments based on that - one about halfway through your tax year, and one at the end. Try to make your estimate as accurate as you can. If you underestimate by too much, a 20% penalty can apply on top of what you owe.
For more on the latest Budget changes that affect provisional tax and other thresholds, read our summary of this year's Budget Speech changes.
Small business tax rates and thresholds for this year
Here's a quick reference for the 2026/2027 tax year:
| Tax type | Who it applies to | Rate/threshold |
|---|---|---|
| Standard company tax | All registered companies | 27% flat |
| SBC tax | Qualifying companies (turnover under R20m, natural-person shareholders) | 0% to 27% depending on profit |
| Turnover tax | Businesses with turnover under R2.3 million | 0% to 3% on turnover |
| Provisional tax | Companies and sole props with business income | Two payments per year |
| VAT | Businesses with turnover over R2.3 million (compulsory) or R120,000 (voluntary) | 15% |
These figures are correct as of August 2026. It's always worth checking sars.gov.za before you file, as rates and thresholds do get updated.
Registering and filing without the panic
Getting registered with SARS is the first step, and it's easier than it sounds. If you haven't done it yet, you can register on SARS eFiling or pop into a SARS branch. Most companies register for income tax through eFiling. If you want to use Turnover Tax, that's a separate registration - you can do it through the SARS website.
Filing season opens once a year and SARS publishes the deadlines at the start of each year. If you're a provisional taxpayer, remember that your two payments happen during the year - you don't wait for filing season to make them.
For a practical checklist of what to do before and during tax season, read getting ready for tax season.
Records you should keep all year
SARS requires you to keep your tax records for at least five years. That means holding onto:
- All invoices you issue and receive
- Bank statements
- Records of sales and income
- Business expense receipts
- Payroll records if you have staff
- Any VAT returns if you're VAT-registered
Good records make everything easier - your provisional tax estimates are more accurate, filing season is less stressful, and you can see exactly where your money is going. If you'd like help staying on top of this through the year, iK Accounting lets you track income and expenses, connect your bank account, and generate reports like cash flow statements and VAT summaries - so nothing gets left to the last minute.
Staying on top of your small business tax
Tax doesn't have to (and shouldn’t) be something you only think about when filing season comes around. The earlier in the year you figure out which category your business falls into and what you're likely to owe, the easier it gets.
One habit that makes a real difference: every time money comes into your business, put a percentage aside in a separate account. When your tax payment is due, the money is already there.
For more on keeping your finances healthy throughout the year, read keeping your cash flow healthy. And if you're not sure whether your business needs to register for VAT, our guide on when your business needs to register for VAT covers the current thresholds and what they mean for you.
iKhokha is built to help South African small businesses manage their money day to day - from taking payments to tracking income and expenses - so you can spend less time on admin and more time on your business.
