Freelancer & Side Hustle Tax: A Simple Guide for Provisional Taxpayers

Earning side hustle or freelance income? You're a provisional taxpayer. Learn how to calculate and pay your two IRP6 tax payments to avoid a massive SARS bill.

Welcome to the gig economy. Whether you're a full-time freelancer or just have a "side hustle," you've discovered a great way to earn extra income.

But with this new income comes a new tax responsibility. If you earn any money that doesn't have PAYE (Pay-As-You-Earn) deducted from it, you are almost certainly a provisional taxpayer.

This means you can't just wait until tax season to pay your bill. You have to "pay as you go" during the year. This is done by filing two IRP6 returns.

Why You MUST Pay Provisional Tax

If you don't, you'll face two problems:

A Massive Tax Bill: You'll file your annual return (ITR12) and suddenly be hit with a bill for 25-45% of your entire year's freelance income, which you may not have saved.
SARS Penalties: You will be charged late payment penalties (10%) and understatement penalties (up to 20%) for failing to pay your provisional tax on time.

How to Calculate and Pay Your IRP6

You must submit two IRP6 returns and make two payments during the tax year:

First Payment (P1): Due by 31 August
Second Payment (P2): Due by 28/29 February

Here is a simplified 4-step guide to calculating your payments.

Step 1: Estimate Your Total Taxable Income for the Entire Year

This is the hardest part. You have to guess your total profit for the full 12-month tax year (1 March - 28 Feb).

Start with your Total Annual Income: (e.g., Your salary from your main job + all your estimated freelance income).
Subtract your Annual Deductions: (e.g., Your RA contributions + your freelance business expenses like internet, software, etc.).
This gives you your Estimated Taxable Income.
- Example: R300,000 (salary) + R100,000 (freelance) - R40,000 (deductions) = R360,000

Step 2: Calculate Your Total Tax Bill for the Year

Now, plug that income figure (R360,000) into the latest SARS tax tables (or use an online calculator) to find your total tax liability for the year.

Subtract the tax rebates (Primary, Secondary, etc.).
Subtract your Medical Tax Credits (MTC).
This gives you your Estimated Total Tax Due for the year.
- Example: Tax on R360,000 is R64,312. After rebates and credits, let's say it's R45,000.

Step 3: Calculate Your First Payment (P1) - Due 31 August

This one is simple.

Take your Total Tax Due (from Step 2) and divide it by 2.
- Example: R45,000 / 2 = R22,500
Crucially: Now subtract the PAYE your employer has already paid for the first 6 months (March - August).
- Example: R22,500 - R18,000 (PAYE) = R4,500.
This R4,500 is what you pay with your first IRP6.

Step 4: Calculate Your Second Payment (P2) - Due 28 February

By now, you have a much better idea of your actual income for the year.

Recalculate your Total Tax Due (from Step 2), but this time using your actual income figures. Let's say you earned more, and your final tax bill is now R50,000.
Subtract the total PAYE your employer paid for the full year.
- Example: R50,000 - R36,000 (total PAYE) = R14,000
Subtract the First Provisional Payment you already made.
- Example: R14,000 - R4,500 (P1 payment) = R9,500.
This R9,500 is what you pay with your second IRP6.

Conclusion:

Being a freelancer means being your own payroll department. The best way to handle this is to track every invoice and every expense in real-time.

Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Tax laws are complex and subject to change. We strongly recommend consulting with a registered tax practitioner to address your specific circumstances. TaxClaw.ai is a tool to assist you in managing your tax obligations and is not a substitute for professional advice.

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TaxClaw's AI model is reviewed by SARS Registered Tax Practitioner PR-0106041.
Tax filings are submitted by SARS Registered Tax Practitioner PR-0092910