In recent years, the rise of the gig economy and freelancing has transformed how many individuals approach earning income in South Africa. With the freedom to set your own hours and pursue diverse opportunities, side hustles and freelancing offer flexibility and financial benefits. However, as with any source of income, they come with tax implications that are important to understand.
This article outlines the tax obligations for freelancers and side hustlers in South Africa, highlighting key considerations, case studies, and practical examples.
Understanding Tax for Freelancers and Side Hustlers
A side hustle refers to any job or business that is done in addition to a person’s primary source of income. Freelancing, on the other hand, involves providing services to clients as an independent contractor rather than being employed full-time by a company.
In South Africa, income from any source, including side hustles and freelancing, is taxable. This means that individuals earning money through these means are subject to the same tax rules as full-time employees.
Tax Obligations for Freelancers and Side Hustlers
Freelancers and individuals with side hustles are required to register with the South African Revenue Service (SARS) and submit annual tax returns. The tax system in South Africa operates on a self-assessment basis, meaning it is the responsibility of the taxpayer to ensure they declare all their income and expenses.
1. Income Tax
Income tax in South Africa is progressive, meaning the more you earn, the higher your tax rate. Freelancers and side hustlers must declare their income from their side businesses or freelance work when filing their tax returns.
The income is taxed according to the applicable tax brackets:
| Income Range (ZAR) | Tax Rate |
|---|---|
| R0 – R226,000 | 18% |
| R226,001 – R353,100 | 26% |
| R353,101 – R488,700 | 31% |
| R488,701 – R641,400 | 36% |
| R641,401 – R817,000 | 39% |
| R817,001 – R1,073,000 | 41% |
| Above R1,073,000 | 45% |
Case Study: Freelancing in the Digital Marketing Industry
Let’s consider a freelance digital marketer named Sarah, who works independently with small businesses to boost their online presence. Sarah earns R300,000 annually from her freelance work.
This income falls within the R226,001 – R353,100 tax bracket, meaning she will be taxed at 26%.
Example: Calculating Sarah’s Tax
Sarah must declare the R300,000 in her tax return. After deductions and exemptions, Sarah will be liable for paying a portion of this income as tax.
Here’s a simple calculation of her income tax:
Income: R300,000
Taxable Income: R300,000
Taxable at 26%: (R300,000 – R226,000) = R74,000 at 26%
Sarah’s tax obligation would be calculated as follows:
R226,000 taxed at 18% = R40,680
R74,000 taxed at 26% = R19,240
Total tax: R59,920
Therefore, Sarah owes SARS R59,920 in tax for the year.
2. Provisional Tax
For freelancers and side hustlers who earn income outside of a regular salary, SARS requires the payment of provisional tax. This is an advance payment made throughout the year, based on expected income.
These payments are usually made twice a year: in August and February. Failure to make provisional tax payments can result in penalties and interest.
Case Study: Side Hustler Earning from Online Sales
John runs an online store, selling handcrafted furniture as his side hustle while working a full-time job. John earns an additional R150,000 annually from his side business.
His total income from his full-time job and side hustle is R500,000.
As John is earning income from both his salary and his side hustle, he must submit a provisional tax payment to SARS to avoid a tax penalty.
SARS will estimate his taxable income, and John is required to make payments based on that estimate.
3. Deductions and Expenses
Freelancers and side hustlers can deduct certain expenses from their taxable income to reduce their tax burden.
Common deductions include business-related expenses such as:
- Office supplies and equipment
- Travel expenses for business purposes
- Software subscriptions or tools used for the business
- Marketing and advertising costs
- Professional services (e.g., legal or accounting fees)
Example: Deducting Business Expenses
Let’s consider that Sarah spent R50,000 on marketing and advertising.
