Capital Gains Tax on a Second Property in South Africa

Selling a second property, whether a holiday home, an inherited flat or a buy-to-let, gets none of the R2,000,000 primary residence exclusion in paragraphs 44 to 51 of the Eighth Schedule. That exclusion applies only to a home you ordinarily live in, and only to one residence at a time, so the full capital gain on the second property enters the calculation. What you pay is then four steps: proceeds less base cost, less the R40,000 annual exclusion, times the 40% inclusion rate for individuals, taxed at your marginal rate. All figures here are for the 2026 year of assessment, 1 March 2025 to 28 February 2026.

The sum on a real sale

Take a seller under 65 who bought a coastal flat for R1,200,000, paid R80,000 in transfer duty and conveyancing, later spent R300,000 adding a bedroom and an enclosed patio, and has now sold it for R2,000,000 with R100,000 of agent commission. The sale agreement went unconditional in November 2025, so the disposal falls in the 2026 year of assessment. Their taxable income before the gain is R400,000, a 31% marginal rate.

Base cost = R1,200,000 + R80,000 + R300,000 + R100,000 = R1,680,000

Capital gain = R2,000,000 - R1,680,000 = R320,000

Less the annual exclusion = R320,000 - R40,000 = R280,000

Taxable capital gain = 40% x R280,000 = R112,000

CGT = R112,000 x 31% = R34,720

No primary residence exclusion enters that calculation, because the flat is not a primary residence. Had it been the seller's own home, the R320,000 gain would have fallen well inside the R2,000,000 exclusion and no CGT would have arisen.

Run your own figures through the capital gains tax calculator before settling on a selling price.

Why the R112,000 costs R34,720 and not more

The taxable capital gain is not taxed at a separate CGT rate. Section 26A includes it in your taxable income, where it runs through the ordinary individual tax table. On R400,000 of other income the 2026 table charges R77,362 plus 31% of the amount above R370,500, which is R86,507 before rebates; the primary rebate of R17,235 brings tax payable to R69,272. Adding the R112,000 taxable capital gain takes taxable income to R512,000, still inside the 31% bracket: R121,227 before rebates, R103,992 after the same rebate.

R103,992 - R69,272 = R34,720

The rebate cancels out of that subtraction, so the cost of the gain is R34,720 either way. The two routes agree only because the whole gain stays inside one bracket; that is when the marginal-rate shortcut holds. Where a taxable capital gain crosses a bracket line, or reaches the 45% top rate, the portion above the line is taxed at the higher rate. The ceiling is 40% x 45%, a maximum effective rate of 18% of the gain.

Base cost is where most of the money is

Every rand you properly add to base cost cuts the gain rand for rand, and at a 31% marginal rate each saves you 12.4 cents of tax (40% included, taxed at 31%). Paragraph 20 of the Eighth Schedule sets the list: the acquisition cost, costs directly related to acquiring the property such as transfer duty and conveyancing, the cost of improving or enhancing it, and the costs of disposal such as agent commission.

Goes into base cost	Does not
Purchase price	Bond interest, bond registration and bond cancellation costs
Transfer duty and conveyancing	Rates, levies, insurance, monthly bond repayments
Capital improvements (an added room, an enclosed patio)	Repairs and maintenance (repainting, fixing a leak)
Agent commission and marketing on the sale	Anything already claimed as an income tax deduction

The improvement-versus-repair line trips sellers up. Replacing a rusted geyser with the same type restores the property, so it stays out; converting a garage into a flatlet improves it, so it goes in. Borrowing costs sit outside that test altogether: bond registration and bond cancellation are excluded along with the interest. Keep the invoices, because SARS can ask for proof of any amount you put into base cost.

If you rented the property out

Rental income and the capital gain sit in two separate calculations. The net rental profit is ordinary income taxed at your marginal rate each year, while the CGT lands once, in the year the sale agreement becomes unconditional. Amounts already claimed against rental income cannot go into base cost as well. The annual side is set out in tax on Airbnb and short-term rental income.

Timing, and one exclusion you only get once

Paragraph 13 puts the disposal on the date the sale agreement becomes unconditional, not on transfer at the Deeds Office and not when the money reaches your account. That date fixes the year of assessment, and so the figures that apply. The annual exclusion in paragraph 5, R40,000 for the 2026 year, is a per-person, per-year amount covering all your capital gains, so if you sold shares in the same year the R40,000 is shared across both disposals, not claimed twice.

A property registered in both spouses' names is disposed of by both, so each declares their share of the gain and each has their own R40,000. Worth checking before the offer is signed.

For the wider picture, see the guide on tax when you sell property or shares. If you are selling the home you live in, capital gains tax on your house sets out the different rules.