South Africa’s 2026 National Budget introduced an important adjustment for homeowners. The capital gains tax exclusion on the sale of a primary residence has increased from R2 million to R3 million.
For buyers, sellers and property practitioners, this change directly affects how much profit a homeowner keeps when selling.
These amendments take effect from 1 March 2026.
Here is what it means in practical terms.
What Has Changed in 2026
The capital gains tax exclusion for a primary residence has increased by R1 million.
Previously
The first R2 million of capital gain on a primary residence was excluded from capital gains tax.
Now
The first R3 million of capital gain is now excluded.
This applies only to your primary residence - the home you ordinarily live in.
It is important to understand that this is not R3 million of the selling price. It is R3 million of the profit made on the property.
Any gain above R3 million remains subject to capital gains tax.
Capital Gains Tax Explained Simply
Before looking at impact, it helps to understand how capital gains tax works.
When you sell a property:
- You calculate the capital gain.
Selling price minus purchase price minus qualifying costs equals the gain. - Forty percent of that gain is included in your taxable income.
- Your normal income tax rate applies to that portion.
- The primary residence exclusion is deducted before this calculation.
Qualifying costs can include transfer duty paid on purchase, legal fees, estate agent commission and certain capital improvements. Accurate record keeping remains essential.
Old vs New: Comparison Table
Item | Previous Exclusion | New Exclusion |
|---|---|---|
Primary Residence CGT Exemption | R2,000,000 | R3,000,000 |
Taxable Portion Above Exclusion | Yes | Yes |
Applies to Investment Property | No | No |
This adjustment recognises that property values have increased materially over the past decade.
What This Means for Sellers
For established homeowners, this change reduces exit tax exposure and improves net sale proceeds.
Example Scenario
If a homeowner made a R2.5 million capital gain:
- Under the old rules, R500,000 would have been taxable.
- Under the new rules, the full R2.5 million is excluded.
That difference can translate into tens of thousands of rands saved.
For sellers with gains above R3 million, the larger exemption still improves net proceeds.
This is particularly relevant for:
- Long-term homeowners downsizing
- Retirees restructuring assets
- Families relocating
- Sellers in higher-value residential brackets
If you are considering selling, it is worth reviewing your estimated net proceeds under the updated rules. You can read our full step-by-step Seller Guide here:
https://www.rrealestate.co.za/selling/
What This Means for Buyers
Buyers are not directly affected at the point of purchase. Transfer duties and bond approvals remain unchanged.
However, the long-term ownership case strengthens.
A higher future tax-free gain:
- Improves investment certainty
- Reduces potential exit friction
- Supports property as a structured long-term asset
For first-time buyers or move-up buyers, this reinforces the benefit of holding property over time.
What This Means for Property Practitioners
For agents and advisors, accuracy matters.
Many homeowners still assume the R2 million exclusion applies. It does not.
Advising clients using outdated tax thresholds can distort net proceeds discussions and pricing strategy.
Understanding the R3 million exclusion allows practitioners to:
- Provide accurate net sale projections
- Structure pricing discussions correctly
- Advise on timing decisions
- Strengthen credibility through factual guidance
In the current market, precision outperforms optimism.
Important Limitations
The R3 million exclusion applies only to a primary residence.
It does not apply to:
- Investment properties
- Holiday homes
- Vacant land
- Certain company or trust structures unless qualifying use applies
Each situation differs. Professional tax advice should always be obtained where structures are complex.
Frequently Asked Questions
Does this mean I pay no tax when I sell my home?
Not necessarily. You pay no capital gains tax on the first R3 million of profit. Gains above that remain taxable.
Does this apply to rental properties?
No. The exclusion applies only to a qualifying primary residence.
Has the capital gains tax rate changed?
No. The inclusion rate and tax calculation method remain the same. Only the primary residence exclusion has increased.
Should I sell because of this change?
Tax is one factor. Pricing, demand and your personal plans matter more. A proper net proceeds calculation should be done before deciding.
Final Thoughts
The increase in the primary residence capital gains tax exclusion from R2 million to R3 million is a practical adjustment that reduces tax pressure on homeowners.
It allows sellers to retain more profit.
It improves long-term ownership confidence.
It strengthens the financial logic behind property planning.
In 2026, informed decisions matter more than headlines. If you are considering selling, ensure your net proceeds calculations reflect current tax law and accurate market data.
