If you are selling the home you live in, capital gains tax almost certainly does not apply to you. For the current 2026/2027 tax year, SARS provides a primary residence exclusion of up to R3,000,000 on the capital gain — and the vast majority of South African homeowners selling their main home will not exceed this threshold.
The picture is different for anyone selling an investment property, a holiday home, a buy-to-let, or a property they have partially rented out. CGT applies to those gains in full, and the calculation surprises sellers who expect a simple flat rate. There is no flat rate. What exists is a system that adds a portion of your gain to your annual income — and taxes it at whatever bracket that pushes you into.
This post explains when CGT applies, when it does not, how the calculation actually works, and what you can do to reduce your exposure. All figures reflect the current 2026/2027 SARS tax year (1 March 2026 to 28 February 2027).
Do you pay CGT when you sell your home in South Africa?
For most sellers of a primary residence, the answer is no. SARS excludes up to R3,000,000 of the capital gain on the sale of a property that qualifies as your primary residence. This threshold was increased from R2,000,000 by Budget 2026, effective 25 February 2026, and applies to sale agreements concluded on or after 1 March 2026.
The primary residence is the property you ordinarily live in — the home where your main life is based. It cannot be an investment you happen to visit occasionally. If you own more than one property, only one of them qualifies as your primary residence for CGT purposes at any given time.
The R3,000,000 primary residence exclusion applies to your capital gain — not your sale price. If you sell your home for R4,500,000 and your total base cost was R2,000,000, your gain is R2,500,000. That gain is fully covered by the exclusion, and you pay no CGT.
If your gain exceeds R3,000,000, only the portion above the threshold is included in your taxable income. A gain of R3,500,000 on a primary residence produces a taxable gain of R500,000 before applying the annual exclusion — not R3,500,000.
If you signed your sale agreement before 1 March 2026, the previous R2,000,000 exclusion applies — not the new R3,000,000 limit. The exclusion that applies is determined by when the sale agreement was concluded, not when transfer takes place.
When CGT does apply to property sales
CGT applies in full when you sell any property that is not your primary residence. This includes:
Investment or buy-to-let properties. If you own a property you rent out and do not live in yourself, the full capital gain is subject to CGT. There is no partial exclusion for the period it was rented versus occupied.
Holiday homes. A property you use for holidays or occasional visits does not qualify as your primary residence, even if you love it deeply. The full gain is taxable.
Second properties. If you own two properties and both are genuinely used as homes, you can only designate one as your primary residence. Gains on the other are fully taxable.
Partial use of your primary residence. If you rent out a room, a flatlet, or a portion of your home, the rental portion loses its primary residence relief. A property used 70% as a personal residence and 30% for rental qualifies for only 70% of the R3,000,000 exclusion.
Properties never used as your primary residence. If you bought a property as an investment from day one and never lived in it, the primary residence exclusion does not apply, regardless of how long you owned it.
If you have converted your primary residence into a rental property and are now selling it, you may still be entitled to partial primary residence relief for the years it was your main home. This calculation is complex — a tax practitioner can work out the apportionment.
How CGT on property is calculated: step by step
Capital gains tax on property is not a separate tax. It works by adding a portion of your capital gain to your personal income tax return, where it is taxed at your marginal income tax rate.
The calculation has four steps.
Step 1: Calculate your capital gain
Capital gain = Proceeds minus base cost minus direct selling costs
Your proceeds are what you receive for the property. Your base cost is what the property cost you in total — covered in detail below. Direct selling costs (estate agent commission, cancellation attorney fees) can be deducted from proceeds.
Step 2: Subtract the annual exclusion
SARS grants individuals a R50,000 annual exclusion (2026/2027 tax year) that applies to total capital gains across all assets in a tax year. Your net capital gain is reduced by R50,000 before proceeding.
Step 3: Apply the inclusion rate
Only 40% of your net capital gain is included in your taxable income. This 40% inclusion rate applies to individuals for the 2026/2027 tax year. The other 60% of your gain is disregarded entirely.
Step 4: Tax at your marginal rate
The included amount (40% of your net gain) is added to your other taxable income for the year. SARS then calculates income tax on your total income using the normal personal income tax brackets. The additional tax attributable to the CGT component is your CGT liability.
What counts as base cost?
Your base cost is the total cost of acquiring and improving the property. A higher base cost means a lower capital gain — so documenting your costs is financially meaningful.
The original purchase price is the starting point.
Acquisition costs at the time of purchase are included: transfer duty, transfer attorney fees, and bond registration and initiation costs are all properly included as costs of acquisition. SARS confirms these are capital costs that reduce your gain when you eventually sell.
Capital improvements are also included: structural extensions, significant renovations, additions that increase the property's value and permanently improve it. Building a carport, adding a second bathroom, extending a kitchen — these qualify. Routine maintenance (painting, replacing taps, fixing a leaking roof) does not. The distinction matters and requires receipts.
Keep every invoice and receipt for any work done on an investment property. SARS requires documentation to substantiate capital improvements in the base cost. Receipts you do not have are costs you cannot claim — and a higher taxable gain you did not need to have.
Direct selling costs — primarily estate agent commission and cancellation attorney fees on your bond — can be deducted from proceeds when calculating the capital gain. These reduce your taxable gain directly.
Worked example: selling an investment property
Consider a seller who bought a Johannesburg buy-to-let property in 2013.
This R396,000 is then added to the seller's other taxable income for the year. If the seller's regular taxable income is R650,000, their total taxable income for the year becomes R1,046,000. SARS taxes the combined amount using the normal income tax tables, and the portion of tax attributable to the R396,000 CGT slice is the seller's CGT liability. These figures are illustrative — your actual liability depends on your full income for the year, and a tax practitioner can calculate this precisely.
Effective CGT rates by income bracket
Because CGT is taxed at your marginal rate, the effective rate varies. The table below shows the effective CGT rate at each income bracket (using the 40% inclusion rate, 2026/2027 tax year):
| Marginal income tax rate | Effective CGT rate (40% inclusion) |
|---|---|
| 18% | 7.2% |
| 26% | 10.4% |
| 31% | 12.4% |
| 36% | 14.4% |
| 39% | 15.6% |
| 41% | 16.4% |
| 45% | 18.0% (maximum) |
The marginal rates themselves — 18% through 45% — are unchanged by Budget 2026. The bracket thresholds were adjusted approximately 3.4% for inflation, with the 45% bracket now applying to taxable income above approximately R1,879,000. Most individual property investors will fall between the 31% and 41% brackets, giving effective CGT rates of roughly 12% to 16% on their gains.
The maximum effective CGT rate for an individual in South Africa is 18%. This is because only 40% of the gain is included in taxable income, and the top marginal rate is 45%. 40% × 45% = 18%. CGT is not, as some sellers fear, a tax on the full gain at the top income tax rate.
The R50,000 annual exclusion
Every individual taxpayer receives a R50,000 annual exclusion (2026/2027 tax year) that reduces their total capital gains from all sources in a given tax year. If you sold a property and also sold shares in the same year, the R50,000 exclusion applies to your combined gains across both, not separately.
For most investment property sales involving significant gains, R50,000 makes a modest difference — it reduces the taxable gain before the inclusion rate is applied. On a R1,000,000 gain, applying the R50,000 exclusion and then the 40% inclusion rate produces a taxable CGT amount of R380,000 rather than R400,000. The saving is real but not transformative on larger gains.
Budget 2026 increased the annual exclusion from R40,000 to R50,000, effective 1 March 2026. It had been stuck at R40,000 for many years without inflation adjustment — the R50,000 figure represents the first increase since the exclusion was set at R40,000.
What if you rent out part of your home?
If your primary residence is partially used to earn rental income — a flatlet, a cottage on the property, or a room you rent on a short-term basis — the primary residence exclusion is apportioned. Only the residential portion qualifies for the R3,000,000 exclusion.
SARS apportions based on the ratio of personal use to income-earning use, typically measured by floor area. If 75% of your home is personal living space and 25% is a self-contained rental unit, you are entitled to 75% of the primary residence exclusion — a maximum of R2,250,000 rather than R3,000,000.
This apportionment calculation needs to be done carefully. If you earn rental income from any part of your property, declare it each year and keep records — an accurate history makes the CGT calculation far more straightforward when you eventually sell.
When to involve a tax practitioner
Selling your primary home where the gain is comfortably below R3,000,000 is straightforward. The CGT impact is zero and the declaration on your tax return is simple.
Anything beyond that warrants professional advice. Investment properties, partial-use situations, properties held in trusts or companies, foreign sellers, or situations where the gain pushes you into a higher income bracket — all of these benefit from a tax practitioner who can calculate your base cost correctly, apply any available exclusions, and advise on provisional tax obligations.
The provisional tax point is worth noting separately. If your CGT liability is material, SARS expects you to include it in your provisional tax estimates for the year. Failing to do so can result in penalties on top of the tax owed. Get ahead of this before the financial year in which you plan to sell.
- Primary residence exclusion: up to R3,000,000 of the capital gain is excluded (increased from R2M by Budget 2026, effective 1 March 2026)
- Investment properties, holiday homes, and second properties have no primary residence relief — full gain is taxable
- Inclusion rate for individuals: 40% — only 40% of your net gain is added to your taxable income
- Maximum effective CGT rate for an individual: 18% (40% inclusion × 45% top bracket)
- Annual exclusion: R50,000 per individual per tax year (increased from R40,000 by Budget 2026)
- Base cost includes purchase price, acquisition costs at purchase, and capital improvements (with receipts)
- CGT is declared in your annual tax return for the year of transfer, not at the moment of sale
Sources: SARS Comprehensive Guide to Capital Gains Tax (updated 2024); TaxTim Capital Gains Tax guide (updated 25 February 2026); National Treasury Budget 2026 Tax Guide (25 February 2026); SARS tax rates for individuals 2026/2027 tax year (effective 1 March 2026).
Capital gains tax on property is one area where getting the numbers wrong costs real money. If your situation involves anything beyond a straightforward primary residence sale, speak to a registered tax practitioner before you sign.
If you are selling a property, your CGT liability is one part of your total net proceeds picture. Zettl's seller calculator works out your net proceeds after agent commission, bond cancellation, 90-day penalty, compliance certificates, and conveyancing fees — in around three minutes. Know your full number before anyone else is in the conversation. Calculate my net proceeds →