Sole Proprietor vs Company: Tax Calculator (South Africa) 2026/2027
Sole proprietor, Turnover Tax or a Pty Ltd company, which one actually pays you the most? Free 2026/2027 calculator with a salary vs dividend optimiser.
Business structure and tax comparison
Business Structure & Tax Calculator
Compare a sole proprietor, Turnover Tax and a registered company side by side, and see how much of your profit actually ends up in your pocket for 2026/27.
Everything the business bills or receives, before any expenses come off.
Stock, rent, salaries you pay staff, fuel, tools, software, all your real running costs, in the same period as turnover above. This is what tells the tools apart, Turnover Tax ignores it.
Used for your personal tax rebate, from age 65 you get a larger one.
A one-person consulting or freelance business with no staff can still fail SARS's stricter "personal service provider" test even if you tick this, ask a tax practitioner if that could be you. Untick this to see the flat 27% company rate instead.
A salary is a company expense, taxed in your hands like a normal payslip, plus UIF. A dividend comes out of the company's after-tax profit and is taxed at a flat 20%. Most owners mix the two.
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Sole proprietor vs company, or Turnover Tax, which pays you the most?
Starting a small business in South Africa means an early, confusing choice, trade as a sole proprietor, elect the simplified Turnover Tax, or register a company with CIPC. Sole proprietor vs company vs Turnover Tax is not a simple question with one right answer, each is taxed under completely different rules, and the cheapest one on paper is not always the cheapest once you actually try to spend the money. This free business structure and tax calculator, and Turnover Tax calculator, takes your turnover and expenses for 2026/2027 and works out what each option really leaves in your pocket, including the real cost of getting money out of a Pty Ltd company as salary or dividends, not just the company's own tax bill.
A registered company's tax rate looks appealing next to personal income tax, but profit sitting inside a company is not yet your money. Paying yourself a salary is taxed again at personal rates plus UIF, and a dividend is taxed again at a flat 20%, on top of the company tax already paid. This calculator searches every salary-to-dividend split from 0% to 100% and shows you the one that keeps the most money in your pocket for your own numbers, so the company comparison is fair rather than flattering.
Small Business Corporation (SBC) tax rates, 2027 tax year
A registered company with natural-person shareholders, gross income under R20 million and no more than 20% investment or personal-service income qualifies for these reduced rates under section 12E, instead of the flat 27% company rate, for financial years ending between 1 April 2026 and 31 March 2027.
| Taxable income | Tax |
|---|---|
| R0 – R99,000 | 0% |
| R99,001 – R365,000 | 7% of the amount above R99,000 |
| R365,001 – R550,000 | R18,620 + 21% of the amount above R365,000 |
| R550,001 and above | R57,470 + 27% of the amount above R550,000 |
Turnover Tax rates, 2027 tax year
Available to sole proprietors, partnerships, close corporations, cooperatives and companies with annual turnover of R2.3 million or less, for years of assessment ending between 1 March 2026 and 28 February 2027. Turnover Tax replaces income tax, provisional tax, capital gains tax and dividends tax, but it is charged on turnover, not profit, so it rewards lean, high-margin businesses and can cost more than standard tax if your expenses are high.
| Annual turnover | Tax |
|---|---|
| R0 – R600,000 | 0% |
| R600,001 – R950,000 | 1% of the amount above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% of the amount above R950,000 |
| R1,400,001 – R2,300,000 | R12,500 + 3% of the amount above R1,400,000 |
A worked example
Take a business turning over R900,000 a year with R300,000 of real expenses, so R600,000 of profit, owner under 65. As a sole proprietor on standard tax, personal income tax comes to about R132,900, leaving about R467,100. Electing Turnover Tax instead, the tax is charged on the R900,000 turnover, only about R3,000 on the 2027 sliding scale, leaving about R597,000, cheaper here because expenses are a modest share of turnover. Registered as a company at its best salary and dividend split, after SBC company tax, UIF and dividends tax on top, take-home lands at about R484,300, better than staying a sole proprietor on standard tax but behind Turnover Tax for this lean a business. Change the expense figure higher and the company or standard-tax picture can flip. Try your own numbers in the calculator above.
Frequently asked questions
Should I register a company or stay a sole proprietor in South Africa?
It depends on your numbers and on more than tax. A sole proprietor is simpler, there is no CIPC registration and no separate company tax return, but you are personally liable for the business's debts and you pay personal income tax on every rand of profit whether you draw it out or not. A registered company (Pty Ltd) ring-fences your personal assets from business debt and can look more credible to clients, banks and investors, but it costs a small CIPC fee to register, needs its own annual return, and getting money out as salary or dividends adds its own tax. This calculator only compares the tax and cash outcome, use it alongside advice on liability protection and your growth plans, not instead of it.
What is Turnover Tax and can I use it?
Turnover Tax is a simplified tax for small, or micro, businesses with an annual turnover of R2.3 million or less. It replaces income tax, provisional tax, capital gains tax and dividends tax with one tax charged on your turnover, not your profit, on a sliding scale from 0% up to R600,000 and rising to 3% on the portion above R1.4 million. Sole proprietors, partnerships, close corporations and companies can all qualify. It works best for lean, high-margin businesses with few deductible expenses, because it ignores what you actually spent. If your expenses are high relative to turnover, standard income tax on your real profit is often cheaper, the calculator flags this for you.
How much does it cost to register a company with CIPC?
A standard private company with CIPC's own Memorandum of Incorporation costs around R125 to register, rising to about R425 if you want a customised MOI. Add roughly R50 if you reserve a company name first, though most owners skip that step and register the name together with the company. It is a once-off cost, not annual, and registration itself typically takes a day or two online through CIPC's BizPortal. A sole proprietor pays no CIPC registration fee at all, since there is no separate legal entity to register.
What is a Small Business Corporation and how is it taxed?
A Small Business Corporation, or SBC, is a company or close corporation that qualifies under section 12E of the Income Tax Act for a lower, sliding-scale company tax rate instead of the flat 27%. To qualify, every shareholder must be a natural person who holds no shares in any other company, the company's gross income must be R20 million or less, and no more than 20% of its receipts can come from investment income or personal services. For the 2027 tax year an SBC pays 0% up to R99,000 of taxable income, then 7%, 21% and 27% on higher bands, which can save a small company tens of thousands of rand compared with the flat rate. This calculator applies SBC rates automatically once you confirm you meet the shareholder test and your turnover is under the R20 million cap.
Salary or dividends, which is better for a small business owner?
There is no single right answer, it depends on your profit level and changes as it grows. A salary is a deductible expense for the company, so it lowers the company's taxable profit, but it is taxed in your hands at personal income tax rates and both you and the company pay UIF on it. A dividend comes out of the company's profit after company tax has already been paid, and is then taxed once more at a flat 20% dividends tax. Because personal tax is progressive and dividends tax is flat, the best mix usually shifts toward more dividends as your profit grows. This calculator searches every split from 0% to 100% salary and shows you which one keeps the most money in your pocket for your own numbers.
When do I have to register for VAT?
VAT registration becomes compulsory once your business's turnover in any consecutive 12 months exceeds R2.3 million. You can also register voluntarily from R120,000 of annual turnover, which lets you claim back VAT on what the business buys but adds monthly or bi-monthly returns. VAT is generally close to cash flow neutral for a registered vendor selling to other VAT-registered businesses, since you charge VAT on sales and reclaim it on purchases, so it is not included in the take-home figures above, only flagged as a compliance step.
Does a sole proprietor pay UIF?
Not on their own profit, UIF only applies to an employer-employee relationship, and a sole proprietor has no separate legal employer. If a sole proprietor takes on staff, they must register those employees and pay 1% employer and 1% employee UIF on their pay. The same applies to a company paying its owner a salary, both the company as employer and the owner as employee pay 1% each, capped at R177.12 a month per side, which the calculator includes in the company scenario.
What is the difference between Turnover Tax and Small Business Corporation tax?
Turnover Tax is charged on your turnover regardless of what you spent, and is available to sole proprietors, partnerships, close corporations, cooperatives and companies with turnover under R2.3 million. SBC tax is a reduced sliding-scale rate charged on a registered company's actual taxable profit, available to a Pty Ltd or close corporation with natural-person shareholders and gross income under R20 million, no turnover ceiling as low as Turnover Tax's. A company can combine Turnover Tax with dividend rules of its own, a less common setup this calculator does not model, ask a registered tax practitioner if that combination applies to you.
What other registrations does a small business need?
Beyond SARS and CIPC, most growing businesses eventually deal with the Compensation Fund (COIDA), compulsory once you have employees, which covers workplace injury claims, and UIF registration for any staff you hire. If your annual payroll across all employees passes R500,000 you also pay a 1% Skills Development Levy. A business with a turnover under R10 million can usually self-certify its B-BBEE status with a sworn affidavit rather than paying for a formal certificate. None of these change the income tax comparison above, but they are real running costs once you take on staff.
Is this calculator tax or legal advice?
No, it is a free independent tool using the official SARS and CIPC 2026/27 rates, thresholds and fees to give you a reliable estimate. It assumes you draw out all of the year's profit for a fair comparison, uses the same deductible expenses across every structure, and does not model a mix of other personal income, retirement contributions, medical aid, or a company combined with Turnover Tax. It is general information, not tax or legal advice. For your specific situation, confirm with SARS, CIPC or a registered tax practitioner.
This calculator gives estimates using the 2026/27 SARS tax tables, Turnover Tax and SBC brackets, dividends tax and CIPC and VAT fees and thresholds. It is general information and not tax or legal advice, and assumes you draw out all of the year's profit for a fair comparison. It does not model other personal income, retirement contributions, medical aid, or a company combined with Turnover Tax. Confirm your own position with SARS, CIPC or a registered tax practitioner. Last reviewed July 2026.