Annualisation is the technique payroll uses to apply SARS's annual tax tables to a single pay period. Because the tables are stated per year, a period's pay is projected to an annual figure, taxed, and the annual tax divided back to the period.
What it means
SARS publishes one set of tax tables for the whole tax year. To find the PAYE on a month's or week's pay, payroll annualises: multiply the period's balance of remuneration by the number of periods in the year, read the annual tax off the tables, then divide by the same number. This keeps the tax even across periods of regular pay.
Where it fits in
Annualisation depends on the pay frequency, since the period count (12, 26 or 52) is the multiplier. Irregular payments such as bonuses are usually annualised differently - added to the year-to-date and re-spread - to avoid taxing a once-off amount as if it recurred every period.
Key rules
- Projects a period's pay to a yearly figure so the annual tables apply.
- The multiplier is the number of pay periods in the tax year.
- Keeps PAYE even across periods of regular, recurring pay.
- Irregular amounts are annualised against year-to-date figures, not the single period.
