How to pay less income tax – a beginner’s guide
There are all sorts of tips and tricks to legally pay less tax.
For most people, the most effective way to slash their income tax liability would be to invest in a retirement annuity (or another similar vehicle such as a company pension fund).
Contributions to a retirement annuity (RA) are “tax-deductible”.
If you earn R250 000 per year and you contribute R25 000 to an RA, then you’re taxed as if you earned only R225 000.
A maximum of 27.5% of your income (or R350 000) is deductible in a year.
If you’ve contributed to an RA in this way, the South African Revenue Service (Sars) will pay a tax refund into your account every year.
(Also read: How to get a tax refund from Sars)
Asset manager 10X has a good explanation – aimed at beginners – on retirement annuities and how they can help you pay less tax.
Refilwe Moloto asked Monica Moodley (Legal Manager at Old Mutual Personal Finance) to elaborate.
Listen to the interview in the audio below.
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