Tax for sole proprietors and freelancers, made simple

How sole proprietors are taxed

A sole proprietor is not a separate legal person: the business is you. Everything it earns, less the costs of earning it, is added to your other income and taxed at the normal personal income tax rates on your ITR12.

There is no separate business tax number; your personal tax number covers it. The same applies to freelancers, contractors, consultants and anyone else earning income that is not a salary with PAYE already deducted. Because you carry on a trade, SARS expects a return every year, even in a year when no tax is due.

Provisional tax: paying as you go

Because nobody deducts tax from your income, SARS expects you to pay it in advance as a provisional taxpayer. You file an IRP6 estimate and pay in two instalments: by 31 August 2026 and by 26 February 2027 for the tax year ending 28 February 2027. An optional top-up payment by 30 September 2027 stops interest on any shortfall. If the second estimate is too low, SARS can add a 20% underestimation penalty, so estimates should come from up-to-date books.

Do you pay tax at all?

Income tax only starts once your total taxable income for the year is above the tax threshold. For the 2027 tax year (1 March 2026 to 28 February 2027) the thresholds are:

Interest earned is exempt up to R23 800 a year (R34 500 if you are 65 or older), but freelance and business income is not, so a side business can push you over the threshold sooner than you expect.

Expenses you can deduct

You may deduct expenses incurred in earning your business income, as long as they are not private or capital in nature and you can prove them. The common ones:

• Home office — a share of rent or bond interest, rates, electricity and cleaning, if a room is used regularly and exclusively for the business and is equipped for it.
• Vehicle — the business share of your car costs, backed by a logbook.
• Equipment — laptops, tools and machinery, claimed over their useful life through the wear-and-tear allowance.
• Running costs — phone and data, software, stationery, professional fees, bank charges and business insurance.
• People — salaries paid to anyone who works in the business.

Keep every invoice and slip. SARS can ask for proof for five years after you file, and an expense you cannot prove is an expense you cannot claim.

Turnover tax: a simpler option

Micro businesses with a turnover of up to R2.3 million a year may qualify for turnover tax instead: a low tax on turnover that replaces income tax on the business profit and keeps the admin light. It suits businesses with high margins and few expenses; for others, normal income tax works out cheaper. We run the numbers both ways before you decide.

When does VAT come in?

Once your taxable sales pass R2.3 million in any 12-month period you must register for VAT; this threshold applies from 1 April 2026. You may register voluntarily once you pass R120 000. See VAT registration for how it works.

Sole proprietor or (Pty) Ltd?

A sole proprietorship is cheaper and simpler to run. A company limits your personal liability and is taxed at a flat 27%, or less on the first part of its profit if it qualifies as a small business corporation, but it costs more to run and needs its own returns. The right choice depends on your profit, your risk and your plans; we will talk it through. See company registration.