Can't pay SARS? Interest, penalties and your options
Owing tax is not unusual, but ignoring it is costly. The South African Revenue Service (SARS) can collect from your bank account without a court order, so the time to act is before it gets that far.
In short
- SARS charges interest of 10.25% a year on late or underpaid tax from 2 March 2026, on top of penalties.
- SARS can instruct your bank to pay your tax debt directly to it, without a court order. This is called a third-party appointment.
- There are four ways to settle: a payment arrangement, a compromise, suspension of collection while you dispute the debt, and the Voluntary Disclosure Programme.
- Contact SARS before a third-party appointment is issued. It usually leads to a better outcome.
What owing SARS costs
Unpaid tax grows in three ways.
- Interest. SARS charges 10.25% a year on late payment or underpayment from 2 March 2026.
- Penalties. Late payment carries a 10% penalty, and other penalties apply for late or incorrect returns.
- Enforcement. After demands, SARS can move to collection.
How collection works
SARS usually sends a letter of final demand first. If the debt is still unpaid, it can issue a third-party appointment. Under section 179 of the Tax Administration Act, this instructs anyone who holds money for you, such as your bank, to pay the debt to SARS. No court order is required. SARS can also appoint your employer to deduct from salary and your debtors to pay it what they owe you.
For a small business this can mean an emptied bank account without warning, so wages and suppliers go unpaid. That is the main reason to act early.
Four ways to settle
| Option | What it is | When it fits |
|---|---|---|
| Payment arrangement | An agreement to pay the debt in instalments you can afford | You accept the debt but cannot pay it at once |
| Compromise of debt | SARS accepts less than the full amount | Full payment would cause you undue financial hardship |
| Suspension of collection | SARS must pause collection of a disputed amount while your objection or appeal is running, if requirements are met | You disagree with the assessment and have objected in time |
| Voluntary Disclosure Programme (VDP) | You disclose income or errors before SARS starts an audit, for reduced penalties | You have undeclared income or errors that you want to put right |
A payment arrangement can be applied for on eFiling or by contacting SARS. The VDP must be used before SARS begins an audit or inquiry, and it can give full relief from understatement penalties where there was no intention to evade tax. Interest remains payable.
What to do before SARS acts
- Know exactly what you owe, and for which periods. Request a statement of account.
- Check whether it is correct. If not, lodge an objection in time.
- Contact SARS early with a proposal you can keep. A broken arrangement is worse than none.
- File any outstanding returns. SARS is less willing to agree terms while returns are missing.
- Keep filing and paying current tax. An arrangement covers the old debt, not new tax.
- Ask an accountant to speak to SARS with you. It saves time and usually improves the terms.
Preventing the problem
Most tax debt starts as a cash flow problem. Put tax dates in a forecast, set money aside monthly, and check your provisional estimate carefully. Our guides on improving cash flow and provisional tax cover both.
What to do now
- Log in to eFiling and check your statement for each tax type.
- Diarise anything falling due in the next three months.
- If you already owe, call us before you call SARS, so the first conversation is a strong one.
Frequently asked questions
Can SARS take money from my bank account?
Yes. After a letter of final demand, it can issue a third-party appointment to your bank, without a court order.
Will SARS agree to instalments?
Often, if you are compliant with your returns and offer a realistic amount. Contact SARS before you are in enforcement.
Does the Voluntary Disclosure Programme remove all penalties?
It can remove understatement penalties where there was no intention to evade, but interest remains payable, and you must apply before SARS starts an audit.
Sources and further reading
- Budget 2026 Frequently Asked Questions (tax debt management, third-party appointments, payment arrangements, Voluntary Disclosure Programme, interest rates), South African Revenue Service
- Tax Administration Act 28 of 2011, section 179 (third-party appointments), Government of South Africa
This article is general information for South African businesses. It is not tax, legal or financial advice, and it reflects the rules and figures at the date shown above. Tax rules change, so confirm the current position before you act. TBL's practitioners are registered tax practitioners.