I’m not a tax consultant, but I feel compelled to share my personal experience so other (South African) freelancers and sole proprietors don’t inadvertently make the same mistake I did several years ago.

In 2018, I learned about Micro Business Turnover Tax and was excited about the prospect of saving some money on my income tax. If you qualify, your income tax is calculated by applying a lower tax rate to the taxable turnover of a micro business, which is great news for freelancers (one would think). My tax consultant checked that I met the criteria, and since the application had to be made in person, she met with a SARS official to do the necessary paperwork, after which SARS approved my Micro Business Turnover Tax status.

To give you some background, I’m a freelance Recruitment Marketer and Social Media Manager. I help recruitment agencies improve their online presence so they can reach the right candidates and clients.

I received official approval and a signed letter from SARS confirming my new tax status. Two years later, they audited me and informed me I was on the wrong tax status – I was supposed to be registered as a Provisional Taxpayer – and would have to pay SARS the difference between the Micro Business Turnover Tax amount and Provisional Tax amount for those two years. Thankfully a payment plan was able to be arranged, and I’ve since settled my debt with SARS, but it was a scary and frustrating time, made even more difficult because it was during the Covid Pandemic when my earnings had already taken a big knock.

I’ve wanted to write about this for a long time, especially as I’ve encountered many freelancers who are incorrectly registered for Turnover Tax (and I worry that SARS will impose a pay-back on them at some point). The ins and outs of income tax for different business types are hard to get one’s head around, which is why I rely on the services of a tax professional (who is now very well-versed in this area).

Here’s what you need to qualify for Micro Business Turnover Tax, according to the SARS website (March 2026):

“A natural person (sole proprietors and partners in a partnership) or a company (including a close corporation and a co-operative) may qualify as a micro business if the qualifying turnover for the year of assessment does not exceed R1 million. The qualifying turnover includes the total receipts from carrying on business activities, excluding any amount of a capital nature and amounts exempt from normal tax.”

The following persons are specifically excluded from qualifying as a micro business:

  • “Persons who hold any shares or have any interest in the equity of a company other than, amongst others, a listed company, a portfolio in collective investment schemes, interests in body corporates, and venture capital companies.
  • If more than 20% of a natural person’s total receipts consist of income from a professional service or, in the case of a company, more than 20% of the income consists of investment income (annuities, dividends, interest, rental income, royalties, and income from the disposal of financial instruments) and income from rendering a professional service.
  • Personal service providers and labour brokers.
  • If that person’s receipts from the disposal of immovable property and other assets used mainly for business purposes exceed R1.5 million over a period of three years (current year of assessment and two preceding years).
  • A company that has a year of assessment not ending on the last day of February, has shareholders other than natural persons, has shares in any other company, is a public benefit organisation, or a recreational club.
  • A partnership with partners other than natural persons, partners who are partners in more than one partnership, or the qualifying turnover of the partnership exceeds R1 million.”

Source 1, Source 2

I want to highlight this section about Professional Services:

“Professional service means a service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science. For natural persons providing professional services at any time during the year of assessment, no more than 20% of their total receipts may be derived from these services, to qualify as a micro business.”

Source 3

Freelance Graphic Designers, Web Developers or Designers, Admin professionals, Social Media Managers, other creatives, and freelancers should pay attention to the word “Consulting” in the description above. According to top Cape Town tax accountants, this applies to you. If you offer professional services, you are considered a consultant. In my case, I consult for recruitment agencies. If you consult in any way, you do not qualify for Turnover Tax. Even if your specific job title isn’t listed, you may still be included under ‘Consulting’.

With all of this in mind, you can take a quick test on the SARS website to see whether you meet the criteria to qualify for Micro Business Turnover Tax, but bear in mind my note above on Professional Services: https://www.sars.gov.za/types-of-tax/turnover-tax/quick-test-for-individuals-and-companies/

I hope this article helps some of my fellow freelancers to avoid ending up registered on the wrong tax status.

Thank you to the Tax Consultants who have been helpful with insight and advice for this article: Jo Kriek from JCount, Garth McGahey from Relax Tax, and Hermina Slabbert from Optimal Accounting and Tax Services.