Capital Gains Tax is one of the most misunderstood taxes in South Africa. Many investors assume it's a flat-rate tax applied separately from their income tax, when in reality it's integrated directly into your normal tax calculation. Understanding how CGT actually works can save you thousands of rands and help you make smarter investment decisions.
This comprehensive guide explains exactly how CGT works for individuals, companies, and trusts in 2026, walks you through real calculations, and shows you the most effective legal strategies to minimise your CGT liability.
What is Capital Gains Tax?
Capital Gains Tax is the tax you pay on the profit (capital gain) when you sell or dispose of an asset for more than you paid for it. It applies to:
- Shares and securities: JSE-listed stocks, ETFs, bonds, and unit trusts
- Property: Investment properties, holiday homes, and commercial real estate (but not your primary residence up to R3 million)
- Cryptocurrency: Bitcoin, Ethereum, and other digital assets
- Business assets: Equipment, goodwill, and intellectual property
- Foreign assets: Offshore investments and foreign currency holdings
CGT is not a separate tax
Here's the critical point most people miss: CGT is not a standalone tax. It's part of your normal income tax. When you make a capital gain, a portion of that gain is added to your taxable income and taxed at your marginal rate. This is why your effective CGT rate depends entirely on your income bracket.
How CGT is calculated: The step-by-step formula
The calculation follows a specific sequence:
- Calculate your capital gain: Selling price minus base cost (purchase price + allowable expenses)
- Apply the annual exclusion: Subtract R50,000 (for individuals)
- Apply the inclusion rate: Multiply the remaining gain by 40% (for individuals)
- Add to taxable income: This amount is added to your other income
- Apply your marginal tax rate: The combined income is taxed according to the SARS tax brackets
Effective CGT rates by income bracket
Because only 40% of your capital gain is included in your taxable income, your effective CGT rate is much lower than your marginal income tax rate. Here's what you actually pay at different income levels:
| Taxable Income | Marginal Rate | Inclusion Rate | Effective CGT Rate |
|---|---|---|---|
| R0 – R260,000 | 18% | 40% | 7.2% |
| R260,001 – R405,000 | 26% | 40% | 10.4% |
| R405,001 – R560,000 | 31% | 40% | 12.4% |
| R560,001 – R735,000 | 36% | 40% | 14.4% |
| R735,001 – R940,000 | 39% | 40% | 15.6% |
| R940,001 – R1,990,000 | 41% | 40% | 16.4% |
| R1,990,001+ | 45% | 40% | 18.0% |
Note: These effective rates apply after the R50,000 annual exclusion. The actual tax you pay depends on your total taxable income including the capital gain.
Detailed calculation examples
Example 1: Selling shares with a R200,000 gain
Let's say you bought shares for R300,000 five years ago and sell them today for R500,000. Your annual salary is R600,000, putting you in the 36% marginal tax bracket.
| Step | Calculation | Amount |
|---|---|---|
| Capital gain | R500,000 - R300,000 | R200,000 |
| Less: Annual exclusion | R200,000 - R50,000 | R150,000 |
| Taxable portion (40%) | R150,000 × 40% | R60,000 |
| CGT at 36% marginal rate | R60,000 × 36% | R21,600 |
Result: You keep R478,400 of your R500,000 sale proceeds after CGT. Your effective CGT rate on the full gain is 10.8% (R21,600 ÷ R200,000).
Example 2: Selling investment property with R800,000 gain
You bought an investment property for R1.2 million and sell it for R2 million. You're a high earner with R1.5 million annual income (41% marginal rate).
| Step | Calculation | Amount |
|---|---|---|
| Capital gain | R2,000,000 - R1,200,000 | R800,000 |
| Less: Annual exclusion | R800,000 - R50,000 | R750,000 |
| Taxable portion (40%) | R750,000 × 40% | R300,000 |
| CGT at 41% marginal rate | R300,000 × 41% | R123,000 |
Result: You keep R1,877,000 of your R2 million sale proceeds. Your effective CGT rate on the full gain is 15.4%.
Key exclusions and exemptions
The R50,000 annual exclusion
Every individual gets an annual exclusion of R50,000 on capital gains. This means your first R50,000 of capital gains in any tax year (1 March to end of February) are completely tax-free. Important points:
- The exclusion applies to your total capital gains for the year, not per asset
- It cannot be carried forward to future years — use it or lose it
- It applies to all asset types combined (shares, property, crypto, etc.)
- Companies and trusts do not receive this exclusion
Primary residence exclusion: R3 million
If you sell your primary residence — the home you actually live in — the first R3 million of any capital gain is excluded from CGT. This is a massive benefit that means most South African homeowners will never pay CGT on their family home.
Example: You bought your home for R2 million ten years ago and sell it today for R4.5 million. Your gain is R2.5 million, which is less than the R3 million exclusion, so you pay zero CGT.
However, the exclusion only applies if:
- The property was genuinely your primary residence (not a holiday home or investment property)
- You owned it in your personal name (not in a company or trust)
- The property is 2 hectares or smaller
Other exempt assets
The following assets are generally exempt from CGT:
- Personal-use assets: Cars, boats, furniture, clothing (items used mainly for personal purposes)
- Retirement fund lump sums: These are taxed under separate retirement tax tables, not CGT
- Life insurance proceeds: Payouts from life insurance policies
- Tax-Free Savings Accounts: All gains in a TFSA are completely tax-free
- South African gold coins: Krugerrands and other SA Mint gold coins
- Compensation for personal injury: Legal settlements and damages
Capital losses: How they work
Not every investment makes money. When you sell an asset for less than you paid, you incur a capital loss. Here's how losses are treated:
Offsetting losses against gains
Capital losses can be offset against capital gains in the same tax year. For example:
- Gain on shares: R150,000
- Loss on property: R80,000
- Net capital gain: R70,000
- After R50,000 exclusion: R20,000 taxable gain
- Taxable at 40%: R8,000 added to your income
Carrying losses forward
If your capital losses exceed your gains in a tax year, the net capital loss can be carried forward indefinitely to offset future capital gains. This is valuable if you have a bad investment year followed by profitable years.
Important: Capital losses can only be offset against capital gains. You cannot use capital losses to reduce your normal income tax on salary, rental income, or business profits.
Understanding base cost
Your capital gain is calculated as the selling price minus the base cost. But base cost includes more than just the purchase price:
What counts as base cost
- Purchase price: The amount you paid for the asset
- Acquisition costs: Broker fees, transfer duties, legal fees, stamp duties
- Improvement costs: For property, any capital improvements (renovations, extensions, new roof) that add value — but not maintenance or repairs
- Disposal costs: Agent commissions, advertising, legal fees when selling
What doesn't count
- Interest on loans used to buy the asset
- Insurance premiums
- Routine maintenance and repairs
- Rates, taxes, and levies (these are deductible against rental income, not for CGT)
Cryptocurrency and CGT
SARS treats cryptocurrency as an asset for CGT purposes. This means:
When CGT applies to crypto
- Selling crypto for Rands or foreign currency
- Trading one cryptocurrency for another (e.g., Bitcoin to Ethereum)
- Using crypto to purchase goods or services
- Receiving crypto as payment for work (taxed as income, not CGT)
Calculating crypto CGT
The calculation is the same as for shares:
- Base cost: Purchase price + transaction fees
- Proceeds: Selling price or market value when traded/used
- Gain: Proceeds minus base cost
Example: You bought 1 Bitcoin for R500,000 and sold it for R800,000. Your gain is R300,000. After the R50,000 exclusion, you have R250,000 remaining. At 40% inclusion, R100,000 is added to your taxable income.
Trading vs. investing
If you're actively trading crypto (frequent buying and selling with the intention to profit from short-term price movements), SARS may classify your profits as revenue income rather than capital gains. This means:
- Profits are taxed at your full marginal rate (not the favourable 40% inclusion rate)
- You cannot claim the R50,000 annual exclusion
- Losses can be offset against other income
The distinction depends on your intention, frequency of trades, and holding periods. If you're unsure, consult a tax practitioner.
CGT for companies and trusts
The CGT rules differ significantly for companies and trusts:
Companies
- Inclusion rate: 80% (vs 40% for individuals)
- Corporate tax rate: 27%
- Effective CGT rate: 21.6% (80% × 27%)
- Annual exclusion: None (the R50,000 exclusion only applies to individuals)
Trusts
- Inclusion rate: 80% (same as companies)
- Trust tax rate: 45% (flat rate)
- Effective CGT rate: 36% (80% × 45%)
- Annual exclusion: None
This is why holding investment properties in a trust or company can be tax-inefficient for capital gains — you pay a much higher effective CGT rate compared to holding in your personal name.
CGT and inherited assets
When you inherit an asset, you don't pay CGT at the time of inheritance. Instead:
- The deceased estate pays CGT: The estate is deemed to have disposed of the asset at market value on the date of death. Any CGT on the gain from the original purchase price to the date-of-death value is paid by the estate.
- Base cost steps up: When you inherit the asset, your base cost is "stepped up" to the market value at the date of death.
- Future gains: When you later sell the inherited asset, you only pay CGT on gains above the stepped-up value.
Example: Your parent bought a property for R500,000 in 2000. When they pass away in 2026, it's worth R3 million. The estate pays CGT on the R2.5 million gain. You inherit it with a base cost of R3 million. If you sell it in 2030 for R4 million, you only pay CGT on the R1 million gain.
Strategies to reduce your CGT liability
1. Use your annual exclusion every year
If you have investments with unrealised gains, consider selling enough each year to use your R50,000 exclusion, then immediately repurchasing. This "crystallises" the gain tax-free and steps up your base cost for future sales. (Note: This strategy has anti-avoidance rules — consult a tax practitioner before implementing.)
2. Time your disposals across tax years
If you're planning to sell multiple assets with large gains, consider spreading the sales across two or more tax years. This allows you to use multiple R50,000 annual exclusions and may keep you in a lower marginal tax bracket.
3. Offset gains with losses
If you have underperforming investments, selling them in the same tax year as your profitable disposals can reduce your net capital gain. This is called "tax-loss harvesting" and is a legitimate strategy used by sophisticated investors.
4. Hold assets in a Tax-Free Savings Account
Investments in a TFSA are completely exempt from CGT, dividend tax, and income tax. Maximise your R46,000 annual TFSA contribution to shelter gains from all taxes.
5. Make retirement annuity contributions
Contributing to a retirement annuity reduces your overall taxable income, which lowers your marginal tax rate. This indirectly reduces your effective CGT rate. For example, if RA contributions drop you from the 36% bracket to the 31% bracket, your effective CGT rate falls from 14.4% to 12.4%.
6. Hold assets long-term
While there's no specific "long-term holding discount" in South African CGT law, holding assets for many years allows compound growth to work in your favour. A R100,000 investment growing at 10% annually becomes R260,000 after 10 years — but you only pay CGT when you sell, allowing the full amount to compound tax-free.
7. Maximise your primary residence exclusion
If you're selling a property that qualifies as your primary residence, ensure you claim the full R3 million exclusion. This can save you hundreds of thousands of rands in CGT.
Foreign assets and currency
South African residents are taxed on their worldwide income and capital gains. This means:
Foreign property and shares
Gains on offshore property, foreign shares, and international investments are subject to South African CGT. The gain is calculated in the foreign currency and then converted to Rands at the exchange rate on the date of disposal.
Currency gains
If you hold foreign currency (cash or in a bank account) and the Rand weakens, you may have a capital gain when you convert it back to Rands. For example, if you bought $10,000 when the exchange rate was R15/$ and later convert it when the rate is R18/$, you have a R30,000 capital gain (R180,000 - R150,000).
Double taxation agreements
If you pay CGT in another country on a foreign asset, you may be able to claim a foreign tax credit in South Africa to avoid double taxation. South Africa has double tax agreements with over 70 countries.
Frequently asked questions
How much is capital gains tax in South Africa?
Individuals get an annual exclusion of R50,000. After that, 40% of the capital gain (the inclusion rate) is added to your taxable income and taxed at your marginal rate. This results in an effective CGT rate between 7.2% (for the lowest bracket) and 18% (for the highest bracket at 45%).
Do I pay capital gains tax on my primary residence?
Your primary residence has a R3 million capital gains exclusion. If your profit from selling your main home is less than R3 million, you pay no CGT at all. Gains above R3 million are subject to CGT at your normal inclusion rate, but most South African homeowners never exceed this threshold.
How do I calculate capital gains tax on shares?
Subtract your base cost (purchase price + broker fees) from the selling price to get your capital gain. Subtract the R50,000 annual exclusion. Multiply the remaining gain by 40% (inclusion rate). Add this amount to your taxable income and apply your marginal tax rate. For example, a R200,000 gain results in R60,000 taxable, which at 36% marginal rate equals R21,600 CGT.
What is the annual CGT exclusion for 2026?
The annual capital gains tax exclusion for individuals is R50,000 for the 2027 tax year (1 March 2026 to 28 February 2027). This means your first R50,000 of capital gains in any tax year are completely tax-free. The exclusion cannot be carried forward to future years.
Can I offset capital losses against capital gains?
Yes. Capital losses can be offset against capital gains in the same tax year. If your losses exceed your gains, the net capital loss can be carried forward indefinitely to offset future capital gains. However, capital losses cannot be offset against your normal income (salary, rental income, etc.).
Do I pay CGT on cryptocurrency in South Africa?
Yes. SARS treats cryptocurrency as an asset for CGT purposes. When you sell, trade, or use crypto to purchase goods/services, you trigger a CGT event. The gain is calculated as the selling price minus your base cost (purchase price + transaction fees). However, if you're actively trading crypto as a business, SARS may classify profits as income rather than capital gains.
What assets are exempt from capital gains tax?
Exempt assets include: your primary residence (up to R3 million gain), personal-use assets like cars and furniture, retirement fund lump sums (taxed separately), proceeds from life insurance policies, and assets in a Tax-Free Savings Account. Gold coins like Krugerrands are also generally exempt for individuals.
How is CGT calculated for companies and trusts?
Companies have an 80% inclusion rate (vs 40% for individuals) and pay CGT at the corporate tax rate of 27%, resulting in an effective CGT rate of 21.6%. Trusts also have an 80% inclusion rate but pay at the trust tax rate of 45%, resulting in an effective CGT rate of 36%. Trusts do not receive the R50,000 annual exclusion.
Do I pay CGT when I inherit property?
No, you don't pay CGT when you inherit. The deceased estate settles any CGT liability on the original gain. However, when you inherit, the property's base cost is 'stepped up' to its market value at the date of death. When you later sell the inherited property, you'll only pay CGT on gains above that stepped-up value.
How do I reduce my capital gains tax liability?
Key strategies include: using your R50,000 annual exclusion every year, holding assets for the long term, spreading disposals across multiple tax years, maximising your primary residence exclusion, holding investments in a Tax-Free Savings Account, offsetting gains with capital losses, and making retirement annuity contributions to reduce your overall taxable income and marginal rate.