1. The Short Answer
When you sell a property that is not your primary residence, such as a rental flat, a holiday home or a plot, the profit is a capital gain. For individuals in 2026/2027:
- The first R50,000 of your total net capital gains for the year is excluded (raised from R40,000 by Budget 2026).
- 40% of what is left is added to your taxable income and taxed at your marginal rate.
- That makes the highest effective rate 18% of the gain (40% × 45%).
The R3 million primary residence exclusion does not apply to a second property. It only covers the home you actually live in. Our CGT calculator does the arithmetic below for you.
2. The Calculation in Five Steps
- Proceeds: the selling price, less the costs of selling (estate agent commission, compliance certificates you paid for to sell).
- Base cost: what you paid for the property plus the costs of buying it and of capital improvements (section 3).
- Capital gain: proceeds minus base cost.
- Annual exclusion: subtract R50,000 from your total net capital gains for the tax year (once per person per year, not per property).
- Inclusion: 40% of the remainder is your taxable capital gain. It is added to your salary and other income and taxed on the normal 2026/2027 tables.
3. What Goes Into Base Cost
The higher your base cost, the lower your gain. These can be added:
- The purchase price
- Transfer duty you paid when you bought, and the conveyancing attorney's fees
- Capital improvements: an extra bedroom, a new kitchen, a swimming pool, a boundary wall, solar panels, as long as the improvement is still part of the property when you sell
- Valuation and survey costs incurred to buy or to work out the gain
These cannot be added:
- Repairs and maintenance, such as repainting or fixing a geyser. For a rental property, you deduct them from rent instead.
- Bond interest, rates, levies and insurance. For a rental property they are deducted from rent each year; for a holiday home they are personal costs and are lost for tax.
- Bond registration costs, because they relate to the loan, not the property
Keep every invoice for improvements. Without proof, SARS can disallow them, and over 10 or 20 years the amounts add up. If you bought the property before 1 October 2001 (when CGT started), special rules let you use a valuation on that date or a time-apportioned base cost; ask a tax practitioner, because the choice can make a big difference.
4. Worked Example: a Buy-to-Let Flat
Kagiso bought a flat in 2015 for R1,200,000, paying R60,000 in transfer duty and attorney's fees. In 2019 he spent R150,000 on a new kitchen and bathroom. He sells it in October 2026 for R2,400,000 and pays R120,000 in agent's commission. His salary gives him a taxable income of R600,000 for 2026/2027, and he has no other capital gains this year.
| Step | Amount |
|---|---|
| Selling price | R2,400,000 |
| Less agent's commission | −R120,000 |
| Proceeds | R2,280,000 |
| Purchase price + buying costs + improvements | R1,410,000 |
| Capital gain | R870,000 |
| Less annual exclusion | −R50,000 |
| Net capital gain | R820,000 |
| Taxable capital gain (40%) | R328,000 |
Kagiso's taxable income rises from R600,000 to R928,000. The extra R328,000 is taxed across three brackets:
- R600,000 to R695,800 at 36%: R34,488
- R695,800 to R887,000 at 39%: R74,568
- R887,000 to R928,000 at 41%: R16,810
Total CGT: R125,866, or about 14.5% of the R870,000 gain. Without the new kitchen on record, the gain would have been R150,000 higher and the tax about R24,600 more.
5. Joint Owners, Inheritance and Part-Time Homes
Owned with a spouse or partner
Each owner declares their share of the gain and gets their own R50,000 annual exclusion. A couple owning 50/50 and married out of community of property would each declare half. In a marriage in community of property, the gain is split equally between the spouses.
Inherited property
If you inherited the property, your base cost is its market value on the date of death, as used in the deceased estate, not what the deceased originally paid. Keep the estate's valuation.
A property that was your home for part of the time
If you lived in the property as your primary residence for some years and let it for others, the primary residence exclusion is apportioned by time. For example, if you lived there for six of ten years, roughly 60% of the gain can be covered by the R3 million exclusion and the rest is taxed as above.
Selling at a loss
A capital loss is first reduced by the R50,000 annual exclusion, then carried forward to offset future capital gains. It cannot be set off against your salary.
6. When and How You Pay
CGT is not paid on transfer. The gain is declared on your income tax return (ITR12) for the tax year in which the sale happened, which for a sale between 1 March 2026 and 28 February 2027 is the 2026/2027 return.
- If you are a provisional taxpayer, for example because the property earned rent, include the taxable capital gain in your provisional tax estimate for the year of the sale. Leaving it out can trigger an underestimation penalty. See our provisional tax guide.
- If you only earn a salary, a one-off gain is generally declared on your annual return, and you pay the tax on assessment.
- Non-resident sellers: if the seller is not a South African tax resident and the price exceeds R2 million, the buyer must withhold 7.5% of the price for an individual seller and pay it to SARS as an advance on the tax. The seller can apply for a directive to reduce it.
Set the tax aside when the sale money comes in. A common mistake is to spend the full proceeds and then receive an assessment a year later.
7. Legal Ways to Reduce the Tax
- Claim every improvement you can prove.
- Time the sale. Transfer date decides the tax year. If you expect lower income next year (for example after retirement), a sale that registers after 1 March puts the gain in that year.
- Use both exclusions if the property is jointly owned.
- Offset losses from other assets sold in the same year, such as shares sold at a loss.
- Contribute to a retirement annuity in the year of the sale. Contributions reduce your taxable income (within the 27.5% and R430,000 limits), so a larger contribution in the year of the sale lowers the rate the gain is taxed at.
For the rules on renting the property out before you sell, see our rental income tax guide.
Work Out Your CGT
Enter your purchase price, improvements and selling price to estimate the 2026/2027 tax.
Open CGT Calculator →Frequently Asked Questions
How much capital gains tax do I pay when I sell a second property in South Africa?
40% of your gain above the R50,000 annual exclusion is added to your taxable income and taxed at your marginal rate. The effective rate is at most 18% of the gain, and lower if your other income is in a lower bracket.
Does the R3 million primary residence exclusion apply to a second property?
No. It only applies to the home you live in as your main residence. A property you lived in for part of the time gets a time-apportioned share of it.
Can I add renovations to the base cost of my property?
Yes, if they are capital improvements that are still part of the property when you sell, such as a new kitchen or an extra room. Repairs and maintenance cannot be added.
When do I pay CGT on a property sale?
On assessment of your income tax return for the year the sale took place. Provisional taxpayers must include the gain in their provisional tax estimates for that year.
What is the base cost of an inherited property?
The market value on the date of death, as used for the deceased estate, not the price the deceased paid.
Sources
Every figure on this page was checked against these official sources on 1 November 2026:
- SARS: Capital gains tax rates and exclusions
- SARS: Rates of tax for individuals (2027 tax year)
- SARS: Capital gains tax for individuals
- SARS FAQ: CGT on a let second property owned by a salaried employee