Use TaxTim's free SARS retrenchment and severance tax calculator to work out how much tax you will pay on your retrenchment package for the 2026 tax year (the SARS year of assessment ending 28 February 2026). Your qualifying severance benefit (the lump sum for the loss of your job) is taxed on the favourable retirement lump-sum table, where the first R550,000 over your lifetime is tax-free. Your leave pay, notice pay and pro-rata bonus are not part of the severance benefit and are taxed as normal income at your marginal rate. Just enter the amounts, whether your retrenchment qualifies, your other income for the year and your age, and the calculator applies the SARS tables for you.
The calculator splits your payout into two parts that SARS taxes under completely different rules.
You only get the favourable severance table if your retrenchment qualifies: you were 55 or older, you became permanently incapacitated, or it was a genuine retrenchment (the employer ceased trading or made a general staff reduction). If you held more than 5% of the company and the reason was the employer ceasing trade or a general staff reduction, the break is lost on that route. The total tax is the severance tax plus the normal-income tax, and what you keep is your gross package less that total.
Severance / retirement lump-sum table — 2025, 2026 & 2027 tax years (cumulative since 1 October 2007):
| Lump sum (R) | Rate of tax |
|---|---|
| 0 – 550,000 | 0% |
| 550,001 – 770,000 | 18% of the amount above 550,000 |
| 770,001 – 1,155,000 | 39,600 + 27% above 770,000 |
| 1,155,001 and above | 143,550 + 36% above 1,155,000 |
Leave pay, notice pay and pro-rata bonus: taxed as normal income at your marginal rate using the SARS individual tax tables for the selected year (top marginal rate 45%).
Qualifying for the severance table: age 55+ at retrenchment, OR permanent incapacity, OR a genuine retrenchment (employer ceasing trade / general staff reduction).
5% shareholder exclusion: the break is lost on the employer-ceasing-trade / staff-reduction route if you ever held more than 5% of the company — but not on the age-55 or incapacity routes.
Example (2026 tax year): Lerato, age 45, is genuinely retrenched and is not a >5% shareholder. She receives a severance lump sum of R800,000 (no earlier lump sums), plus leave pay R40,000, notice pay R30,000 and a pro-rata bonus R20,000. She had already earned R350,000 of taxable income this year.
Figures are illustrative; the marginal-rate part depends on the exact SARS brackets and rebate for the year, and the IRP3(a) directive is authoritative.
The first R550,000 of a qualifying severance benefit is taxed at 0%. But this is a once-in-a-lifetime amount shared with retirement-fund lump sums and counted cumulatively since 1 October 2007, so if you have already received earlier lump sums, less (or none) of the R550,000 remains. Leave pay, notice pay and your pro-rata bonus do not get the tax-free band; they are taxed as normal income.
You qualify if any one of these is true: you were 55 or older when retrenched; you became permanently incapable of working through illness, accident or injury; or your employer stopped (or is stopping) trading or made a general staff reduction (a genuine retrenchment). An ordinary resignation or dismissal does not qualify, and the lump sum would then be taxed as normal income at your marginal rate.
If you ever held more than 5% of the company's shares or member's interest, you lose the severance tax break when the reason for leaving is the employer ceasing trade or a general staff reduction. However, if you instead qualify by being 55 or older, or by becoming permanently incapacitated, the break still applies regardless of your shareholding.
SARS does not treat leave pay, notice pay or a pro-rata bonus as part of the severance benefit. They are taxed as normal income at your marginal rate, stacked on top of the salary you already earned that year, so they can be taxed at up to 45%, unlike the severance benefit which is capped at 36% and gets the R550,000 tax-free band.
SARS taxes severance and retirement lump sums cumulatively. It adds your current severance benefit to all earlier lump sums received since 1 October 2007, works out the tax on that total using the table, then subtracts the tax that applied to the earlier lump sums. The difference is the tax on your current benefit, which stops the tax-free band being granted more than once.
It is a close estimate. Your employer must apply to SARS for an IRP3(a) tax directive, and the directive sets the exact employees' tax to withhold. The directive uses your actual lifetime lump-sum history on SARS's records, so if your earlier-lump-sums figure is incomplete the directive amount may differ. Always treat the result as an estimate and confirm with the directive.
Ready to file with TaxTim?
Turn these numbers into a properly completed, SARS-ready return. TaxTim guides you question-by-question and submits to SARS eFiling for you.
Start your tax return