Small Business Tax Guide (2026)

Understanding small business tax obligations helps you comply with SARS requirements and manage your business finances effectively. Small businesses have specific tax requirements, deductions, and obligations. This comprehensive 2026 guide covers everything small businesses need to know about taxes in South Africa.

Tax Registration

Registering for Tax

Tax Registration Required:

• Register with SARS for income tax
• Get tax number
• Register for VAT (if applicable)
• Register for PAYE (if employing)
• Register for other taxes as needed

Registration Process:

• Register through SARS eFiling
• Or visit SARS branch
• Provide business information
• Receive tax number
• Start tax compliance

Types of Business Tax

Tax Obligations

1. Income Tax:

• Tax on business profits
• Annual tax return
• Provisional tax (if applicable)
• Payable on profits

2. Value Added Tax (VAT):

• Register if turnover exceeds R1 million
• Optional if below threshold
• Charge VAT on sales
• Submit VAT returns

3. Pay-As-You-Earn (PAYE):

• If employing staff
• Deduct from salaries
• Pay to SARS monthly
• Submit PAYE returns

4. Skills Development Levy (SDL):

• If payroll exceeds R500,000 annually
• 1% of payroll
• Payable monthly
• Submit returns

5. UIF Contributions:

• If employing staff
• 2% of salaries (1% employee, 1% employer)
• Payable monthly
• Submit declarations

Income Tax

Business Income Tax

Taxable Income:

• Business profits
• Revenue minus expenses
• Allowable deductions
• Net taxable income

Tax Rates (2026):

• Companies: 27% of taxable income
• Small business corporations: Reduced rates
• Individuals: Progressive rates
• Check applicable rates

Deductions:

• Business expenses
• Depreciation
• Bad debts
• Interest expenses
• Other allowable deductions

VAT Registration

VAT Requirements

Mandatory VAT Registration:

• Turnover exceeds R1 million
• Must register within 21 days
• Charge VAT on sales
• Submit VAT returns

Voluntary VAT Registration:

• Turnover below R1 million
• Can register voluntarily
• Charge VAT on sales
• Claim input VAT

VAT Rate:

• Standard rate: 15%
• Zero-rated items: 0%
• Exempt items: No VAT

Provisional Tax

Provisional Tax Requirements

Who Must Pay:

• Companies
• Certain individuals
• If tax liability exceeds threshold
• Pay in advance

Payment Deadlines:

• First payment: End of 6 months
• Second payment: End of tax year
• Top-up payment: 7 months after year-end
• Pay on time

Tax Deductions

Allowable Deductions

Common Deductions:

• Business expenses
• Salaries and wages
• Rent and utilities
• Office supplies
• Travel expenses
• Marketing costs
• Professional fees
• Depreciation
• Interest expenses

Non-Deductible:

• Personal expenses
• Capital expenses (depreciated)
• Fines and penalties
• Non-business expenses

Tax Returns

Filing Tax Returns

Annual Tax Return:

• File annual return with SARS
• Declare business income
• Claim deductions
• Calculate tax liability
• Pay any tax due

Filing Deadline:

• Companies: Within 12 months of year-end
• Individuals: By specified deadline
• Check exact deadline
• File on time

Tax Planning

Tax Optimization

Tax Planning Strategies:

• Maximize deductions
• Time income and expenses
• Use tax-efficient structures
• Plan for provisional tax
• Consult tax advisor

Important:

• Plan legally
• Don't evade tax
• Use legitimate strategies
• Maintain records
• Comply with laws

Record Keeping

Tax Records

Required Records:

• Income records
• Expense records
• Receipts and invoices
• Bank statements
• Tax returns
• Supporting documents

Record Retention:

• Keep for 5 years
• Store safely
• Organize records
• Easy to access
• For SARS audits

Tips for Small Business Tax

Best Practices

1. Register Promptly: Register for all applicable taxes
2. Keep Records: Maintain accurate tax records
3. File on Time: File returns by deadlines
4. Pay on Time: Pay taxes when due
5. Maximize Deductions: Claim all allowable deductions
6. Get Professional Help: Consult tax advisor if needed

Frequently Asked Questions

What taxes do small businesses pay?

Small businesses may pay: income tax on profits, VAT (if turnover exceeds R1 million), PAYE (if employing), SDL (if payroll exceeds R500,000), and UIF (if employing). Tax obligations depend on business type and activities.

When must I register for VAT?

Register for VAT within 21 days if your turnover exceeds R1 million. You can also register voluntarily if turnover is below R1 million.

What are allowable tax deductions?

Allowable deductions include: business expenses, salaries, rent, utilities, office supplies, travel, marketing, professional fees, depreciation, and interest expenses. Personal expenses are not deductible.

When are tax returns due?

Company tax returns are due within 12 months of year-end. Individual tax returns have specific deadlines. Check exact deadlines with SARS and file on time.

Do I need a tax advisor?

While not mandatory, a tax advisor can help with tax planning, maximizing deductions, ensuring compliance, and handling complex tax matters. Consider professional help for complex situations.

Conclusion

Small business tax obligations include income tax on profits, VAT registration if turnover exceeds R1 million, PAYE if employing, SDL if payroll exceeds R500,000, and UIF if employing. Register for all applicable taxes, maintain accurate records, file returns on time, pay taxes when due, and maximize allowable deductions. Understanding small business tax helps you comply with SARS requirements and manage your business finances effectively in South Africa.