How retrenchment and severance packages are taxed in South Africa, including the tax-free portion.

Quick answer: Severance pay enjoys a favourable tax treatment — the first R550,000 of a qualifying retrenchment lump sum is tax-free over your lifetime.

Severance Pay Basics

If retrenched, you are entitled to at least one week of pay per completed year of service, plus notice pay and accrued leave. The severance portion gets special tax treatment.

Tax Treatment

Qualifying severance lump sums are taxed on the retirement lump sum table: the first R550,000 is tax-free (lifetime), then 18%, 27% and 36% on higher portions.

Remember UIF

Retrenchment qualifies you to claim UIF. Use our UIF calculator to estimate your benefit.

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