Net effect of a raise after PAYE, and the real increase after inflation.
Net annual raise
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Extra tax
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Real increase
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Worked example
Take a current salary of R450,000 a year, a 7 percent raise, and expected inflation of 5 percent, for someone under 65. The raise lifts the salary to R481,500, a gross increase of R31,500. That extra income is taxed at your marginal rate, and the additional tax it triggers is about R9,765, so the net raise you keep is R31,500 minus R9,765, which is R21,735. The real picture is smaller again: a 7 percent raise against 5 percent inflation works out to roughly 1.9 percent in real terms, because prices have risen too. So a headline 7 percent feels like a meaningful bump, but after tax and inflation your true gain in spending power is modest.
Step
Amount
New salary (after 7% raise)
R481,500
Gross raise
R31,500
Less extra tax
minus R9,765
Net annual raise
R21,735
Real increase after inflation
1.9%
How it is calculated
A raise is taxed only on the new slice of income, at your marginal rate, so the calculator works out your tax on the new salary and on the old salary and takes the difference as the extra tax. The net raise is the gross increase less that extra tax, which is what actually reaches your bank account over the year. The real increase is a separate idea: it strips out inflation by dividing one plus the raise by one plus inflation, then subtracting one. If your raise just matches inflation, the real increase is zero and your spending power is flat despite a higher number on the payslip. A raise below inflation is a pay cut in real terms. The calculation applies the current SARS brackets and rebates, and assumes the raise is your only income change in the year.
Frequently asked questions
How much of my raise do I keep after tax in South Africa?
Your raise is taxed at your marginal rate, so the net increase is the gross raise less the extra tax it triggers. The real increase is smaller still: once you divide the new salary by inflation, a raise below the inflation rate is a pay cut in real terms even though the number on your payslip is higher.
What is a marginal tax rate and why does it matter for a salary increase?
South Africa uses a progressive income tax system with seven brackets. Your marginal rate is the rate that applies to the top slice of your income. When you receive a raise, only the new portion is taxed at that marginal rate, not your entire salary. If your current salary sits in the 36% bracket, each extra rand of the raise costs you 36 cents in PAYE, so you keep 64 cents after tax on the incremental amount.
What is the difference between a nominal raise and a real raise?
A nominal raise is the percentage increase on your payslip. A real raise is the nominal increase divided by the inflation rate, measuring whether your purchasing power actually improved. A 7% raise with 5% inflation gives a real increase of about 1.9%, meaning you can buy only slightly more than before. A raise exactly equal to inflation delivers a real increase of zero: your lifestyle is flat even though your salary number rose.
Does a salary increase affect my UIF contributions?
Yes. UIF contributions are calculated as 1% of your remuneration from you and 1% from your employer, but contributions are capped once your monthly salary reaches the ceiling set by the Department of Employment and Labour. If your raise keeps you below the ceiling, your monthly UIF deduction will rise slightly. Once your salary exceeds the ceiling, contributions are capped and further increases do not add to the UIF amount.