Two-Pot Withdrawal Tax, Explained
The biggest shock for most members is how much tax a Two-Pot withdrawal attracts. Unlike retirement lump sums, a pre-retirement Savings Component withdrawal does not use the favourable lump-sum tax tables. It is added straight to your income and taxed at your marginal rate.
How the tax is actually calculated
When you withdraw from your Savings Component, SARS issues a tax directive to your fund. The fund adds your gross withdrawal to your annual taxable income and works out the additional tax that pushes you up the brackets. That additional tax is withheld before you receive a cent. In practice this means:
- A member earning R400,000 a year sits in the 31% marginal bracket, so a R20,000 withdrawal is largely taxed at 31%.
- A large withdrawal can push part of the amount into the next bracket, raising the effective rate.
- Lower earners pay less — someone in the 18% band keeps far more of their withdrawal.
Our core withdrawal calculator performs exactly this marginal calculation, including the case where a withdrawal straddles two brackets, so you see your true effective rate.
SARS 2026/2027 marginal tax brackets
| Taxable income | Tax payable |
|---|---|
| R0 – R245,100 | 18% of taxable income |
| R245,101 – R383,100 | R44,118 + 26% of the amount above R245,100 |
| R383,101 – R530,200 | R79,998 + 31% of the amount above R383,100 |
| R530,201 – R695,800 | R125,599 + 36% of the amount above R530,200 |
| R695,801 – R887,000 | R185,215 + 39% of the amount above R695,800 |
| R887,001 – R1,878,600 | R259,783 + 41% of the amount above R887,000 |
| R1,878,601 and above | R666,339 + 45% of the amount above R1,878,600 |
Brackets shown are for the 2026/2027 year of assessment (1 March 2026 – 28 February 2027) and apply before tax rebates and medical credits.
Why not the lump-sum tables?
The gentle retirement lump-sum tables (which include a tax-free portion of up to R550,000 over your lifetime) are reserved for money you take at retirement. Pre-retirement Savings withdrawals are deliberately taxed at marginal rates to discourage early depletion of your fund. Cashing out early therefore costs you both the higher tax today and the compounding growth tomorrow.
The IT88 risk: outstanding tax debt
Before releasing your directive, SARS checks whether you owe tax. If you have outstanding debt, SARS can issue an IT88 directive instructing your fund to deduct the amount owed from your withdrawal. This means your net payout can be lower than the after-tax figure — sometimes substantially. If you are unsure of your SARS standing, check your eFiling account before applying.
Key takeaways
- Withdrawals are added to income and taxed at your marginal rate, not lump-sum rates.
- A big withdrawal can bump you into a higher bracket.
- IT88 debt orders can further reduce your payout.
- Always model your specific numbers — start with the withdrawal calculator.
This is general tax information, not advice. Your exact liability depends on rebates, credits and your full income. Confirm with SARS or a registered tax practitioner.