13th cheque tax — how a South African annual bonus is taxed
A 13th cheque is taxed as an annual payment: payroll adds it to the employee's projected annual remuneration, works out the tax on the full year, and deducts the extra PAYE in the month the bonus is paid. It is reported under IRP5 code 3605 and attracts UIF up to the monthly ceiling.
Payroll Africa Editorial · SARS Payroll Compliance Team
The Payroll Africa editorial team is composed of registered tax practitioners, payroll administrators and BCEA specialists who maintain the SARS PAYE, UIF, SDL and ETI engines that power the platform. Every article is reviewed against the current SARS BRS and Basic Conditions of Employment Act before publication.
- SARS registered tax practitioners
- SAPA-affiliated payroll administrators
- BCEA and LRA compliance reviewers
Last updated 23 Aug 2026
Why the bonus month feels over-taxed
Because the bonus is added on top of annual income, it is taxed at the employee's marginal rate — often a bracket higher than the normal salary rate. Nothing extra is being charged; the annual liability is simply collected in one month. Employees on R25,000 a month who receive a full 13th cheque often see PAYE roughly double in December.
The correct calculation method
SARS requires the annual-payment method rather than simply taxing the bonus at the current period's rate.
- Annualise the regular remuneration for the tax year
- Add the bonus to that annualised figure
- Calculate tax on the total, then on the annualised figure without the bonus
- The difference is the PAYE on the bonus, deducted in that month
UIF, SDL and retirement funding
UIF still applies in the bonus month but only up to the R17,712 remuneration ceiling, so the employee contribution is capped at R177.12. SDL applies at 1% of the full leviable amount including the bonus. Whether the bonus is pensionable depends on the fund rules — a pensionable bonus increases the retirement contribution and the resulting tax deduction.
Reducing the tax bite legally
The bonus can be sacrificed into a retirement annuity or pension fund before payment, within the 27.5% of remuneration limit capped at R350,000 a year, which removes it from taxable income. Splitting a bonus across two tax years, or paying it as a performance bonus in a lower-earning month, also changes the marginal outcome. The choice must be made before the payment is due.
Frequently asked questions
Related guides
Ready to run compliant SARS payroll?
Start free, migrate in a day, and process your first payroll in minutes.