Capital gains tax explained

How the tax is worked out

1. Capital gain = proceeds (what you sold for) minus base cost (what the asset cost you, see below).
2. If the asset was your primary residence, take off the primary residence exclusion.
3. Add up all your gains and losses for the tax year and take off the annual exclusion.
4. Multiply what is left by the inclusion rate: 40% for individuals.
5. Add that “taxable capital gain” to your other taxable income. It is taxed at your normal income tax rates for the year.

Because only 40% of the gain is taxed, and the top income tax rate is 45%, the most an individual can pay is 18% of the gain (40% × 45%). Someone in the 26% bracket pays an effective 10.4%.

The 2026/27 figures

The higher exclusions were announced in Budget 2026 for disposals from 1 March 2026. SARS is applying them while Parliament finalises the amending law. Companies include 80% of a gain (an effective 21.6%), and trusts other than special trusts include 80% at 45% (an effective 36%).

Example 1: selling shares

You sell shares for R 500 000 that cost R 300 000, and you have no other gains this year. Your other taxable income is R 400 000.

• Capital gain: R 500 000 − R 300 000 = R 200 000.
• After the annual exclusion: R 200 000 − R 50 000 = R 150 000.
• Taxable capital gain: 40% × R 150 000 = R 60 000.
• Your taxable income rises from R 400 000 to R 460 000, all in the 31% bracket, so the extra tax is R 18 600: 9.3% of the gain.

Example 2: selling your home

You bought your home in 2012 and have lived in it ever since. The base cost is R 1 850 000: the R 1 200 000 price, R 60 000 of transfer duty and transfer fees, R 340 000 of improvements (a new bathroom and a carport) and R 250 000 agent’s commission on the sale. You sell for R 5 400 000.

• Capital gain: R 5 400 000 − R 1 850 000 = R 3 550 000.
• Primary residence exclusion: R 3 550 000 − R 3 000 000 = R 550 000.
• Annual exclusion: R 550 000 − R 50 000 = R 500 000.
• Taxable capital gain: 40% × R 500 000 = R 200 000.
• With other taxable income of R 600 000, the R 200 000 is taxed partly at 36% and partly at 39%: extra tax of R 75 126, about 2.1% of the whole gain.

Many home sellers pay no CGT at all, because their gain on a home they have always lived in is below R 3 million. The exclusion is reduced if you let the home, used part of it for business or did not live in it for part of the time you owned it (see below).

Example 3: selling a second (rental) property

A flat you let out makes a gain of R 800 000. There is no primary residence exclusion, so 40% of R 750 000 (after the annual exclusion), R 300 000, is added to your income. On a salary of R 700 000 that costs R 119 260 in extra tax. Earlier deductions you claimed on the flat may also be “recouped” and taxed as ordinary income, so ask your tax practitioner before you sell.

Base cost: what you can add

• The purchase price.
• Transfer duty, transfer attorney fees, and valuation, survey and advertising costs to buy or sell.
• Agent’s commission and broker fees.
• Improvements that are still part of the asset when you sell it.
• VAT you could not claim back.

You can’t add repairs and maintenance, insurance, rates, bond registration costs or, in most cases, bond interest. Keep invoices for improvements for as long as you own the asset; without them, the gain looks bigger than it is. For assets owned before 1 October 2001 there are three ways to set a starting value: the market value on that date (if it was valued in time), 20% of the proceeds after later spending, or time-apportionment.

The primary residence exclusion in detail

• It applies to one home at a time, owned by you as a person (or a special trust), on up to 2 hectares of land used mainly for domestic purposes. A home held in a company or an ordinary trust does not qualify.
• If you used part of the home for business (a home office) or let part of it, or did not live there for part of the time you owned it, the gain is split and only the residential share gets the exclusion.
• Co-owners share it. Spouses who each own half get R 1 500 000 of the exclusion each.
• Some absences still count as living there: up to 5 years let out while you work more than 250 km away or abroad (if you lived there for a year before and after, and no other home is treated as your primary residence in that time), and up to 2 years while the home is for sale, being built, or after it was accidentally made uninhabitable.

Capital losses

A capital loss reduces your other capital gains in the same year. The annual exclusion applies to the net figure, so it also shrinks a loss: a net loss of R 120 000 becomes R 70 000 carried forward. Capital losses can only be used against future capital gains, never against your salary.

What is not taxed

• Personal-use assets such as your car, furniture and jewellery (not property, shares or crypto assets).
• Growth inside a tax-free savings account or a retirement fund.
• Most life insurance payouts to the original owner.
• Winnings from lawful South African gambling and lotteries.

Special situations

• Crypto assets: SARS treats them as assets. Gains from trading are usually ordinary income; gains on long-term holdings are capital. Either way they must be declared.
• Death: everything you own is treated as sold at market value on the day you die, with the R 440 000 exclusion. Assets left to a surviving spouse carry over at your base cost instead.
• Emigration: when you stop being a South African tax resident, most of your worldwide assets are treated as sold at market value (South African property is an exception).
• Non-resident sellers of SA property: if the price is over R 2 million, the buyer must withhold 7.5% of the whole price (10% for a company, 15% for a trust) and pay it to SARS as an advance on the seller’s tax.
• Gifts: giving an asset away is treated as selling it at market value, and donations tax may apply too.

When and how you pay

There is no separate CGT return. You declare the sale on your income tax return (ITR12) for the tax year in which the sale agreement became unconditional, not when the money arrived. If you are a provisional taxpayer, include the gain in your provisional tax estimate for that year.

Frequently asked questions

How much is capital gains tax in South Africa?

For individuals, between 0% and 18% of the gain: 40% of the gain after exclusions is added to your income and taxed at your marginal rate.

Do I pay CGT when I sell my house?

Only on the part of the gain above R 3 million if it was your main home for the whole time you owned it. If you let it or used part of it for business, only the residential share of the gain gets the exclusion.

Is the R 50 000 exclusion per asset?

No. It is per person per tax year, against your total gains and losses.

Can I reduce CGT legally?

Keep records of every cost you can add to base cost, use your annual exclusion each year by spreading sales over tax years, and use a tax-free savings account for long-term investing.

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