Retirement lump sum tax

The fast answer: a retirement, death or severance lump sum is taxed on its own SARS table, not at your salary rate, and the first R550,000 you ever take is tax-free. A withdrawal lump sum (cashing out a fund when you resign) is taxed far more harshly, with only the first R27,500 tax-free. The calculator below applies the correct SARS special lump-sum tax table for the year you choose, aggregates your prior lump sums the way SARS does, and shows the tax and the net you keep, to the cent.

Open the retirement lump sum tax calculator →

Two tables, one big difference

Lump sums from a retirement fund are not added to your ordinary income and taxed at your marginal rate. They are taxed separately, on one of two special tables:

• The retirement table applies to a lump sum taken at retirement, on death, or as a severance benefit (a genuine retrenchment or a qualifying termination). It is the taxpayer-friendly one: the first R550,000 across your lifetime is taxed at 0%, and the rates step up from there.
• The withdrawal table applies when you cash out a fund before retirement, typically on resignation, or when a portion is assigned to an ex-spouse on divorce. It is much harsher: only the first R27,500 is tax-free, and the 18% band starts almost immediately.

The single figures above (R550,000 and R27,500) are the tax-free floors; the full rate steps are set out in the SARS retirement and withdrawal lump-sum tax tables for the 2026 year of assessment, which the calculator reads directly rather than hard-coding. The practical lesson is stark: taking the same rand as a withdrawal instead of at retirement can more than double the tax.

Lifetime aggregation: prior lump sums matter

The special tables are cumulative over your lifetime, and this is what most people miss. SARS does not tax each lump sum on a fresh table. It:

1. adds the current lump sum to all your relevant prior lump sums,
2. works out the table tax on that running total,
3. subtracts the tax already reckoned on the prior lump sums, and
4. charges you the difference.

So the first tax-free slice is only ever granted once. A prior lump sum, even one that was itself within the tax-free band, uses up part of that slice and pushes your next benefit into higher rate steps. The aggregation reaches back to fixed start dates: 1 October 2007 for retirement and death benefits, 1 March 2009 for withdrawals, and 1 March 2011 for severance benefits. Enter the total of your prior lump sums in the calculator and it applies this difference method for you.

Worked example (show the workings)

Sipho, under 65, retires and takes a R900,000 retirement lump sum. He has never taken a lump sum before, so his prior pool is R0.

On the retirement table, the first R550,000 is tax-free and the balance is taxed on the retirement table's rate steps. Using the SARS retirement lump-sum tax table for the 2026 year of assessment, the tax works out to R74,700.00, leaving him a net R825,300.00. Sipho keeps most of it.

Now change one thing. Suppose Sipho had already drawn a R300,000 lump sum some years earlier. The special method stacks the new R900,000 on top of that R300,000, taxing the slice of the table from R300,000 to R1,200,000. The tax on the same R900,000 is now R159,750.00, more than double. The earlier R300,000 was itself tax-free at the time, yet it consumed part of the once-off tax-free slice and lifted the new benefit into the 27% and 36% steps.

And if Sipho had instead resigned and withdrawn that R900,000 (no prior lump sums), the withdrawal table would tax it at R172,710.00, against R74,700.00 at retirement. Same rand, wildly different tax. This is exactly the reasoning worth seeing before you sign a withdrawal form.