i What this calculator does
Quick answer: Work out the tax on a retrenchment package using the severance benefit table, and see what is left after the R550,000 lifetime. With the default inputs (severance benefit 400 000, previous lump sums taken 0), it returns net in your hand of R433 300.00.
A severance benefit is taxed on its own table rather than at your marginal rate, and the first portion is exempt. That table is shared across your lifetime with retirement lump sums, so a previous withdrawal reduces what is left.
Many people receive a retrenchment package and immediately consider using it to start trading. Knowing the after-tax figure first, and how much of the lifetime exemption it consumes, changes that decision.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
How to use the Severance and Retrenchment Tax Calculator
Open it and there is already an answer. Swap one figure and the effect of that figure alone becomes visible.
- 1. Severance Benefit (R)
- 2. Previous Lump Sums Taken (R) Retirement or severance benefits already received
- 3. Leave and Notice Pay (R) Taxed as normal income, not on the table
- 4. Other Annual Income (R)
- 5. Your Age
The result panel reports:
- Net in Your Hand From a package of
Alongside the headline figures, the calculator reports tax on severance, tax on leave and notice, severance benefit, leave and notice pay. Those are the numbers that usually explain why the headline result came out where it did.
The method is visible: the steps sit directly below the result.
See also: Capital Gains Tax Calculator.
Common results
What the calculator returns as the severance benefit changes, with every other input at its default (previous lump sums taken 0, leave and notice pay 45 000, other annual income 300 000, your age 42).
| Severance Benefit | Net In Your Hand | Total Tax | Exemption Used |
|---|---|---|---|
| R100 000 | R133 300.00 | R11 700.00 | R100 000.00 |
| R200 000 | R233 300.00 | R11 700.00 | R200 000.00 |
| R400 000 | R433 300.00 | R11 700.00 | R400 000.00 |
| R1 000 000 | R931 600.00 | R113 400.00 | R550 000.00 |
| R2 000 000 | R1 585 550.00 | R459 450.00 | R550 000.00 |
| R4 000 000 | R2 865 550.00 | R1 179 450.00 | R550 000.00 |
Figures used in this calculator
The South African constants this calculator relies on, with the page that holds the current value and the date it was last verified.
- Income tax brackets 2026/27: 18% to 45%, first bracket to R245,100, top rate from R1,878,601. Source: SARS Income Tax Tables (verified 27 September 2026).
- Primary rebate: R17,820 a year. Source: SARS Income Tax Tables (verified 27 September 2026).
- Tax threshold, under 65: R99,000. Source: SARS Income Tax Tables (verified 27 September 2026).
- UIF contribution: 1% each from employee and employer, ceiling R17,712 a month. Source: PAYE, UIF and SDL Reference (verified 29 September 2026).
- VAT: 15%. Source: VAT Rates and Registration Thresholds (verified 29 September 2026).
- CGT inclusion and exclusion: 40% inclusion, R50,000 annual exclusion. Source: Capital Gains Tax Rates and Exclusions (verified 15 October 2026).
- Dividends Tax: 20%. Source: Dividend Withholding Tax by Country (verified 27 September 2026).
- Single discretionary and foreign investment allowances: R2 million and R10 million a calendar year. Source: Exchange Control Allowances (verified 27 September 2026).
How the calculation works
Five inputs drive the result: Severance Benefit, Previous Lump Sums Taken, Leave and Notice Pay, Other Annual Income and Your Age. Previous Lump Sums Taken: Retirement or severance benefits already received. Leave and Notice Pay: Taxed as normal income, not on the table. The cumulative lump sums is R0.00 + R400 000.00 = R400 000.00. The tax on table is tax(R400 000.00) - tax(R0.00) = R0.00. The leave pay tax is R45 000.00 at your marginal rate = R11 700.00. The total tax is R0.00 + R11 700.00 = R11 700.00. The breakdown also lists severance benefit, previous lump sums, cumulative before and cumulative after.
A worked example in rand
Run it with the inputs it opens with, severance benefit R400 000, previous lump sums taken R0, leave and notice pay R45 000, other annual income R300 000 and your age 42, and the net in your hand comes out at R433 300.00, from a package of r445 000.00. The other figures are total tax R11 700.00 and exemption used R400 000.00. Now set the severance benefit to 800 000: the net in your hand moves from R433 300.00 to R785 600.00, the total tax moves from R11 700.00 to R59 400.00 and the exemption used moves from R400 000.00 to R550 000.00.
How to read the result
For the default case the verdict is: "The full lifetime exemption was available, so the first R400 000.00 is tax free." Read it as a flag rather than advice: it tells you where the numbers sit relative to the usual rules of thumb. Tax results depend on the tax year, your age band and your other income, so the figure is yours only if all three inputs are; a colleague's result is not a guide to your own. SARS Tax Season Dates explains the thinking behind these figures.
The South African angle
Using the severance and retrenchment tax calculator from South Africa adds a few local facts to the arithmetic. SARS taxes profit from frequent trading as income at the marginal rate, up to 45%, and gains on long-term investments as capital gains with 40% inclusion, so the same rand of profit can be taxed at 45% or at 18% depending on intent and frequency. The single discretionary allowance of R2 million a calendar year and the R10 million foreign investment allowance, which needs SARS clearance, are the two gates every offshore trading deposit passes through. The 2026 Budget raised several thresholds at once, including the tax-free savings limit and the retirement deduction cap, so calculators built on 2025/26 figures are now wrong by meaningful amounts. The severance and retrenchment tax calculator draws on the same figures, which are kept on the SARS income tax tables and updated as they change.
Spotted an outdated figure? If a rate, limit or formula in this calculator no longer matches its source, email us the page and the source. A material correction is dated on the Updates Log.
Frequently asked questions
Is a retrenchment package taxed at my marginal rate?
Not the severance benefit itself. It is taxed on the retirement and severance lump sum table, where the first R550,000 across your lifetime is taxed at zero. Leave pay and notice pay are different: they are ordinary income taxed at your marginal rate.
Does the R550,000 reset each time?
No. It is a lifetime amount shared across severance benefits and retirement lump sums. A withdrawal taken years ago reduces what is available now, which is why the calculator asks for prior lump sums.
What counts as a qualifying severance benefit?
Broadly, a payment on retrenchment where the employer ceases operations or reduces staff, and where you did not hold more than 5% of the company. A resignation payout does not qualify and is taxed as ordinary income.
Should I use a retrenchment package to start trading?
That is a personal decision, but the arithmetic is worth seeing first. The package is often the largest lump sum someone will hold, it is not replaceable, and the loss rates published by regulated CFD brokers are high. Most financial planning guidance puts an emergency fund and debt clearance ahead of any market exposure.
Is the two-pot withdrawal counted in the same lifetime total?
Withdrawals from the savings component are taxed as ordinary income at your marginal rate rather than on the lump sum table, so they are treated differently. Retirement lump sums taken at retirement do count toward the same cumulative total.
Do I need to declare it if the employer already deducted tax?
Yes. The payment appears on your IRP5 and must be reflected on your return. SARS issues a tax directive for the severance benefit, and the amount deducted is credited against your assessment.
Want to embed this calculator on your site?
Embed this calculator
Free to use on your own site. Copy the code below and paste it where you want the calculator to appear.
<iframe src="https://www.tradeanswers.co.za/embed/severance-tax-calculator.html"
width="100%" height="750" style="border:0;max-width:520px"
title="Risk Per Trade Calculator - TradeAnswers" loading="lazy"></iframe>
<p><a href="https://www.tradeanswers.co.za/severance-tax-calculator.html">Severance and Retrenchment Tax Calculator</a> by <a href="https://www.tradeanswers.co.za/">TradeAnswers</a></p>