You've sold an investment property. You've cashed out some shares. Or you're finally selling your home. And now you're wondering: Do I have to pay tax on this?
Capital Gains Tax (CGT) is one of the most misunderstood taxes in South Africa. Many people assume it's a separate tax system or a flat fee applied to all sales. In reality, it forms part of your normal income tax.
If you sell an asset for more than you paid for it, the South African Revenue Service (SARS) wants a share of that profit. But with the right planning, you can legally minimise what you owe — and in many cases, pay nothing at all.
This guide covers everything you need to know about Capital Gains Tax in South Africa — what it is, how it works, who pays it, and how to plan for it.
What Is Capital Gains Tax?
Capital Gains Tax is not a standalone tax. It's integrated into the income tax system. When you make a profit (a "capital gain") from selling an asset, a portion of that gain is added to your taxable income for the year and taxed at your marginal rate.
Introduced: 1 October 2001.
Who pays it: Almost everyone who makes a profit from selling an asset — including individuals, companies, and trusts.
Tax residents: South African tax residents are liable for CGT on assets located anywhere in the world.
Non-residents: Typically only liable for CGT on immovable property located in South Africa or assets belonging to a South African business establishment.
What Triggers CGT?
CGT is triggered by the disposal of an asset. Disposal includes:
- Sale of an asset
- Donation of an asset
- Expropriation of an asset
- Vesting of an interest in an asset of a trust in a beneficiary
- Death of a person
- Ceasing to be a South African resident
CGT Rates and Inclusion Rates
Not all of your capital gain is taxed. SARS only includes a specific percentage of your profit in your taxable income — this is called the inclusion rate.
| Taxpayer Type | Inclusion Rate | Maximum Effective CGT Rate* |
|---|---|---|
| Individuals & Special Trusts | 40% | 18% (40% × 45%) |
| Companies | 80% | 21.6% (80% × 27%) |
| Other Trusts | 80% | 36% (80% × 45%) |
*Assuming top marginal tax rate
What this means in practice: If you make a R100,000 profit, only R40,000 (if you're an individual) is added to your taxable income. That amount is then taxed at your marginal tax rate.
Exclusions From CGT
SARS provides several exclusions to help reduce your tax burden.
Annual Exclusion
Every individual taxpayer receives an annual capital gain exclusion. The first R40,000 of your capital gain in a tax year is completely exempt from tax (R50,000 from the 2027 tax year).
Important: If your total capital gains for the year fall below this threshold, you owe no CGT.
Primary Residence Exclusion — R2 Million → R3 Million
When you sell your primary residence — the home you live in for most of the year — the first R2 million of your capital gain is entirely excluded from CGT (increasing to R3 million from 1 March 2026).
Why this matters: This generous exclusion protects most ordinary homeowners from paying tax when they move houses. For tax years ending up to 28 February 2026, the exclusion is R2 million. From 1 March 2026, it increases to R3 million.
Paul buys a house for R1,500,000 and lives in it for ten years. He sells it for R3,000,000. His capital gain is R1,500,000. Because this is his primary residence, the R2 million primary residence exclusion applies. Since his profit is less than R2 million, Paul pays no CGT on the sale.
Qualifying requirements:
- The property must be ordinarily occupied as your primary residence
- Only one property may qualify as a primary residence at a time
- The exclusion only applies to up to two hectares of land used primarily for domestic purposes
- The property must be owned as an individual or through a special trust
- Non-residents do not qualify for the exclusion
Joint owners: The R2 million or R3 million exclusion is split when more than one person owns a primary residence jointly, as long as each owner uses it as their primary residence.
Important: If you claim a home office tax deduction, that portion of your home loses its primary residence exclusion status. When you sell, you will have to pay CGT on the percentage of profit tied to the home office.
Year of Death Exclusion
In the tax year that a person passes away, the annual exclusion increases significantly. Instead of the standard R40,000, the exclusion jumps to R440,000 (increased from R300,000 from March 2026).
Personal Use Assets
You do not need to worry about paying tax when selling your second-hand car, washing machine, or bicycle. Personal use assets are entirely exempt from CGT.
Spousal Rollover
Assets bequeathed to a South African resident surviving spouse are rolled over tax-free, deferring CGT until the spouse's subsequent disposal or death.
Small Business Exclusions
Individuals who are at least 55 years old can exclude up to R2.7 million of capital gains (increased from R1.8 million) when disposing of a small business with a market value not exceeding R15 million.
How to Calculate CGT — Step by Step
Step 1: Determine Proceeds and Base Cost
| Term | What It Means |
|---|---|
| Proceeds | The total amount you receive from the disposal (sale price, insurance payout, etc.) |
| Base Cost | The original purchase price, plus costs to acquire, improve, or sell it |
For a property, base cost includes:
- Purchase price
- Transfer costs, transfer duty, and professional fees
- Cost of improvements, alterations, and renovations
- Agent's commission and advertising costs
Step 2: Calculate the Capital Gain
Capital Gain = Proceeds – Base Cost
Step 3: Apply Exclusions
- Subtract the annual exclusion (R40,000 or R50,000)
- Subtract the primary residence exclusion (R2 million or R3 million, if applicable)
- Subtract any other applicable exemptions
Step 4: Apply the Inclusion Rate
Taxable Gain = Net Gain × 40% (for individuals)
Step 5: Apply Your Marginal Tax Rate
The taxable gain is added to your income for the year and taxed at your marginal rate.
Prefer to let the numbers do the work? Use our Capital Gains Tax Calculator to estimate your CGT liability in seconds — just enter your proceeds, base cost, and property type.
Calculating CGT — Examples
Example 1: Simple Investment Gain
Sarah buys shares for R20,000 and sells them for R50,000.
- Capital Gain: R30,000
- Annual Exclusion: R40,000
- Net Gain: R0 (R30,000 – R40,000 = negative)
- Taxable Gain: R0
She pays no CGT.
Example 2: Investment Property (Exceeding Annual Exclusion)
David buys an investment property for R1,000,000. He spends R200,000 on renovations, making his base cost R1,200,000. He sells it for R1,500,000.
- Capital Gain: R1,500,000 – R1,200,000 = R300,000
- Net Gain: R300,000 – R40,000 = R260,000
- Taxable Amount: 40% × R260,000 = R104,000
This R104,000 is added to David's taxable income and taxed at his marginal rate.
Example 3: Primary Residence
Paul buys a house for R1,500,000 and lives in it for ten years. He sells it for R3,000,000.
- Capital Gain: R3,000,000 – R1,500,000 = R1,500,000
- Primary Residence Exclusion: R2,000,000
- Net Gain: R0 (R1,500,000 – R2,000,000 = negative)
- Taxable Gain: R0
Paul pays no CGT.
Example 4: Primary Residence Exceeding the Exclusion
Selling a primary residence for a profit of R4,000,000 (after 1 March 2026, with the R3 million exclusion):
- Capital Gain: R4,000,000
- Primary Residence Exclusion: R3,000,000
- Net Gain: R1,000,000
- Taxable Amount: 40% × R1,000,000 = R400,000
- Tax at 45%: R180,000
Tax Payable: R180,000.
Example 5: Inherited Property
A farm is inherited in 2018 when it was valued at R800,000. The beneficiary sells it for R1,300,000.
- Capital Gain: R1,300,000 – R800,000 = R500,000
- Step-up in base cost applies: base cost is the market value at date of death, not the original R120,000 purchase price
- Net Gain: R500,000 – R40,000 = R460,000
- Taxable Amount: 40% × R460,000 = R184,000
Tax Payable: R184,000 added to taxable income and taxed at marginal rate.
When Does the Primary Residence Exclusion Apply?
The R3 Million Rule: If the residence is sold for R3 million or less (or R2 million before 1 March 2026), the whole capital gain is disregarded unless:
- The seller or spouse did not use the residence as their primary residence for the whole period of ownership, or
- The seller or spouse used the residence for business purposes at any time
When the Exclusion Does Not Apply:
- If the property was not used as your primary residence for the entire ownership period
- If part of the property was used for business purposes (e.g., home office deduction)
- If the property is held through a company or ordinary trust
- If you are a non-resident
CGT and Inherited Property
When a person dies, they are deemed to have disposed of all their assets at market value on the date of death. This triggers CGT in their estate.
Key point: The beneficiary receives a step-up in base cost to the market value at the date of death. This means you only pay CGT on the increase in value from the date of inheritance, not from the original purchase date.
Important: In the year of death, the annual exclusion increases to R440,000.
CGT for Non-Residents
If a non-resident sells immovable property in South Africa worth more than R2 million, the buyer must withhold a percentage of the purchase price and pay it directly to SARS.
| Seller Type | Withholding Rate |
|---|---|
| Non-resident individuals | 7.5% |
| Non-resident companies | 10% |
| Non-resident trusts | 15% |
The non-resident can later submit a tax return to calculate the exact CGT owed and claim a refund if the withheld amount was too high.
Important for foreign property owners:
- Even if no tax is payable, you may still need to register as a taxpayer and submit annual returns
- The primary residence exclusion does not generally apply to non-residents
- Both spouses are entitled to the tax-free profit of R297,500 on disposal, but the R3 million CGT exemption is shared between spouses
How to Reduce Your CGT Liability
1. Keep Meticulous Records
Maintaining proper documentation is critical. Keep:
- Purchase contracts and receipts
- Conveyancing costs and transfer duty receipts
- Receipts for improvements, alterations, and renovations
- Agent's commission and advertising costs
2. Maximise Your Exclusions
- Use your annual exclusion (R40,000 or R50,000) each year
- If selling your primary residence, ensure the R3 million exclusion applies
- Consider the small business exclusion if applicable
- Plan estate transfers to use the year of death exclusion
3. Spousal Rollover
Assets bequeathed to a South African resident surviving spouse are rolled over tax-free, deferring CGT until the spouse's subsequent disposal or death.
4. Retirement Contributions
Maximise retirement annuity contributions in the sale year. It creates a deduction that partially shelters the gain.
5. Timing Matters
The time of disposal is determined by when the sale agreement becomes unconditional and fully operative. If you are in the process of selling, timing can affect whether the R2 million or R3 million exclusion applies.
When to Pay CGT
Your capital gains tax liability becomes payable when SARS issues your income tax assessment for the year. You must declare your capital gains and losses on your annual income tax return (ITR12).
If you are a provisional taxpayer: You must include estimated capital gains in your provisional tax calculations to avoid underpayment penalties.
- CGT is not a standalone tax — it's integrated into your income tax system
- Only 40% of your capital gain is taxed (for individuals)
- The maximum effective CGT rate for individuals is 18%
- The first R40,000 of capital gain is tax-free each year (R50,000 from 2026/2027)
- The first R2 million of gain on your primary residence is tax-free (R3 million from 1 March 2026)
- Personal use assets (cars, household items) are exempt
- Keep all receipts — you need to prove your base cost
- Non-residents face withholding tax on property sales over R2 million
- Claiming home office expenses can reduce your primary residence exclusion
- Inherited property gets a step-up in base cost to market value at date of death
