Tax Tips for Sole Proprietors in South Africa

In South Africa, understanding and managing your tax responsibilities is essential for avoiding penalties and maximising your financial outcomes—especially if you’re operating as a sole proprietor, freelancer, or earning income from crypto trading.

Whether you’re a creative freelancer, an independent contractor, or an individual crypto trader, this guide offers practical, up-to-date insights into personal and provisional tax responsibilities tailored to your situation.

• Clear and updated explanations of South African tax regulations.
• Practical tips for staying compliant with SARS as an individual or an unregistered business.
• Specific guidance for freelancers, sole proprietors, crypto traders, and provisional taxpayers.
• Insights into how CH Consulting can help you file accurately, on time, and with peace of mind.

Before diving into tax tips, it’s important to understand how SARS categorises your income. If you’re not operating a registered company but still earning income outside of a traditional salary, SARS will typically treat you as one of the following:

1. Income Taxpayer

If your only source of income is from a salaried job and you earn below the tax threshold, you may not need to file. However, once you start earning income outside your employment (like freelancing or trading), you’re required to declare it.

2. Provisional Taxpayer

Freelancers, sole proprietors, and individuals with non-salaried income must register as provisional taxpayers. This means you’ll need to:

• Submit two provisional tax returns (IRP6) during the tax year.
• Submit a final personal income tax return (ITR12) at year-end.
  

Failing to do so could result in underestimation penalties and interest.

If you’re earning income from trading or investing in cryptocurrencies, SARS considers it taxable. Whether your crypto activities fall under capital or income of nature, depends on how frequently and systematically you trade. This makes tailored tax advice essential.

Tax compliance in South Africa can be tricky—especially for small business owners without formal accounting support. Here are frequent pitfalls we see:

• Not Registering as a Provisional Taxpayer – If you earn more than R30,000 annually from freelance work, a side hustle, or other non-salaried sources, you must register. Missing this step leads to understatement penalties.
• Mixing Personal and Business Finances – Sole proprietors often blur the line between personal and business expenses. This can make it hard to justify deductions during an audit. We recommend maintaining a separate bank account for your business income and expenses.
• Underreporting or Omitting Crypto Income – Many believe crypto is “invisible” to SARS. It’s not. Crypto exchanges may report your activity, and you are legally obliged to declare any capital gains or income.
• Incorrect or Incomplete Record keeping – SARS requires supporting documentation for all income and expense claims. Poor record keeping can lead to disallowed deductions and higher tax liability.
• Missing Deadlines – Failure to file your IRP6 on time (August and February) or your ITR12 by the SARS deadline can result in late submission penalties and interest charges.

1. Keep Thorough Financial Records

• Use cloud-based tools like Sage, Xero, or even Excel spreadsheets.
• Log every invoice, receipt, and expense claim in real-time.

2. Track Business Expenses Carefully

• You may be able to deduct a portion of rent, internet, mobile costs, fuel, and travel — if legitimately related to income generation.
• Keep receipts and detailed explanations of each expense.

3. Estimate Provisional Tax Accurately

• Work with a tax professional to avoid underestimation penalties.
• SARS allows an 80% – 90% accuracy buffer (dependent on your taxable income) in the second provisional return—but penalties kick in for incorrect estimates.

4. Declare Crypto Income Accurately

• Keep track of every transaction and consider using crypto tax professionals for better reconciliation.
• Determine whether your gains are income or capital of nature.

5. Plan for Retirement and Use Allowances

• Contribute to a Retirement Annuity (RA) to reduce taxable income.
• Take advantage of tax-deductible contributions up to 27.5% of taxable income.

6. Stay Informed About SARS Changes

• Tax regulations change often. Stay ahead of new compliance requirements by working with a professional.

At CH Consulting, we’re not generalists. We specialise in working with:

• Freelancers and independent contractors
• Sole proprietors across all industries
• Crypto investors and traders
• South African provisional taxpayers

Our services go beyond basic submissions. We offer:

• Tailored tax planning to reduce liability legally and ethically.
• Accurate provisional and personal income tax returns (IRP6 and ITR12).
• Crypto tax assessments that comply with current SARS guidance.
• Dedicated support for all SARS queries, objections, and audits.

   

Our deep understanding and intense focus of individual tax scenarios means we can focus entirely on your needs, and that of your unregistered business.

Q: I’m a freelancer earning less than the yearly threshold. Do I need to register for provisional tax?
A: Possibly not, if this is your only income. However, it’s best to consult with us directly to avoid assumptions—particularly if you’ve earned from other sources like crypto or investments.

Q: How does SARS treat income from side hustles?
A: Side hustle income is taxable. Whether it’s tutoring, content creation, or Uber driving, it must be declared if your total taxable income exceeds the threshold.

Q: Can I claim my home office expenses?
A: Yes, but only if the space is used exclusively and regularly for your work. A dedicated room is also required, not just the kitchen table. (Read more here)

Q: How do I calculate crypto gains?
A: It depends on whether your trading is frequent (income of nature) or occasional (capital of nature). We help determine which applies and do accurate calculations using your trading history.

Need Expert Help?

You are welcome to book a call if you want us to consult on your specific circumstances or complete your calculation and return on your behalf.

You can also email us at info@chconsulting.co.za if you have any questions; or check out our Google Reviews to see what other customers have experienced when working with us.