How does capital gains tax work in South Africa?
Capital gains tax is not a separate flat tax. Only 40% of a gain — after a R50,000 annual exclusion — is added to your taxable income and taxed at your marginal rate. The most anyone can pay is an effective 18% of the gain.
And it only happens on disposal: an investment can triple in value for twenty years and owe nothing until the year it is sold.
CGT waits for a disposal
Growth on paper is never taxed. CGT is triggered by a disposal — selling the asset, giving it away, or death (which the law treats as a deemed disposal of everything you own). Until one of those happens, a gain can build for decades untouched.
That timing rule is why capital growth is the most patient of the investment tax streams — the other streams, dividends and interest, get taxed as they arrive. The full picture is in "How are investments taxed — dividends, interest, REITs?".
The sum starts with base cost
The gain is proceeds minus base cost — and base cost is more than the purchase price. It includes qualifying costs of buying, improving and selling the asset: transfer costs, broker fees, renovation costs on a property (not repairs), and so on.
Every rand of provable base cost shrinks the gain before any tax arithmetic starts — which is why the paperwork from a purchase years ago still matters in the year of sale.
The exclusions
Before anything is taxed, the law carves out slices that are ignored entirely:
- R50,000 of gains per person, per tax year (raised from R40,000 in Budget 2026)
- R440,000 in the year of death, replacing the annual R50,000
- R3,000,000 of the gain on a primary residence — the home you actually live in (raised from R2,000,000)
Only 40% of the gain counts
After the exclusion, the inclusion rate applies: 40% of what remains is added to your taxable income for the year. The other 60% is never taxed at all.
That included slice is then taxed at your marginal rate — the same brackets as salary, covered in "How much income tax do you pay in South Africa?". At the top 45% bracket, 40% × 45% works out to a maximum effective rate of 18% of the gain. Everyone below the top bracket pays effectively less.
A worked example
Shares bought for R250,000 (base cost) are sold for R550,000 — a gain of R300,000.
Subtract the R50,000 annual exclusion: R250,000 remains. Apply the 40% inclusion rate: R100,000 is added to taxable income. At a 36% marginal rate, that adds R36,000 of tax.
R36,000 on a R300,000 gain is an effective 12% — a long way below the 36% many sellers brace for, and below even the 18% ceiling.
Terms used on this page
- taxable income
- The income tax is calculated on, after allowed deductions. For most salaried people it is roughly gross salary minus retirement contributions.
- marginal rate
- The tax rate on your next rand of income — the bracket the top slice of your income falls into.
- base cost
- What an asset cost you in SARS's eyes — the purchase price plus qualifying costs like transfer fees, broker charges and improvements. A capital gain is measured from here.
- inclusion rate
- The slice of a capital gain that gets added to your taxable income. For individuals it is 40% — the other 60% of the gain is never taxed.
Reviewed July 2026 · 2026/27 tax year figures