Provisional tax and the IRP6, explained

Provisional tax is not a separate tax. It's the same income tax you'd owe anyway, paid in instalments during the year instead of in one frightening lump after assessment. The IRP6 is the small return you file with each instalment, telling SARS what you estimate the year will look like.

The system exists because PAYE only works for salaries. If you earn income no employer withholds on — freelance work, rental, a business, meaningful interest — SARS wants its money as you earn, and provisional tax is the mechanism.

Who is a provisional taxpayer?

Broadly: anyone who earns income that isn't remuneration under PAYE — sole proprietors, freelancers, landlords, partners — and every company. Salaried people with small side income get some relief: you're generally excluded if your taxable income apart from salary stays within the exemption limits (for interest) or below the de minimis. But a salaried person with, say, R120,000 of net rental profit is a provisional taxpayer, employer PAYE notwithstanding.

Two payments, two estimates

• •First period (IRP6/1): due by the end of August (six months into the tax year) — half the tax on your estimated taxable income for the full year, less PAYE already withheld.
• •Second period (IRP6/2): due by the end of February — the tax on your full-year estimate, less the first payment and PAYE.
• •An optional third “top-up” payment after year-end lets you settle any shortfall before interest accrues on assessment.

The basic amount and the 8% escalation

You don't have to guess from nothing. The “basic amount” is the taxable income from your most recently assessed return — SARS pre-populates it on the IRP6. One twist: if that last assessment is more than 18 months old (a common state of affairs, given assessment lag), the basic amount is increased by 8% per year for each year since. So a 2024 assessment of R500,000 used for a 2027 estimate becomes R500,000 × 1.08 × 1.08 × 1.08 ≈ R629,856. The escalation exists precisely so that stale figures can't be used to understate a growing income.

The 90% / 80% safe harbour on the second payment

The second-period estimate carries an underestimation penalty — up to 20% of the shortfall — and the safe harbours are how you avoid it. If your actual taxable income turns out to be R1 million or less, you're safe if your estimate was at least 90% of the actual figure, OR at least the basic amount. Above R1 million the basic-amount escape falls away: your estimate must be at least 80% of actual, full stop. The practical reading: small taxpayers can lean on the basic amount; larger ones must genuinely estimate, and a February estimate made carelessly is the most expensive shortcut in the calendar.

Worked example: actual taxable income lands at R1.4 million; your February estimate was R1 million. That's 71% of actual — below the 80% line — so the penalty applies to the tax shortfall between 80% of actual (R1.12m) and your estimate. Estimating well in February requires knowing your January numbers in February, which is a bookkeeping problem before it's a tax one.

Botswana differs

Botswana runs its own instalment system through BURS — companies pay quarterly self-assessed instalments (SAT), and the mechanics, dates and forms are entirely different from the IRP6. Don't map one country's calendar onto the other.

How Ledgr fits in

Ledgr doesn't file your IRP6 — nobody should promise that lightly, and we don't promise it at all. What it does is keep a running tax picture with the working shown, so that when February comes the estimate is a number you can defend, not a guess. When you approve a period's figures, Ledgr records exactly what you reviewed — and if a late invoice or a recategorised expense changes those figures afterwards, the approval is marked stale so you know your filed estimate and your books have diverged.

If most of your income is a salary and the confusion is a bonus month, that's a different mechanism entirely — see PAYE on bonuses.