Capital gains tax (CGT) is not a separate tax. When you sell a business asset, 40% of the net capital gain is added to your taxable income and taxed at your normal rate, after the first R50,000 of gains for the year is excluded (2026/27). That makes the maximum effective CGT rate for an individual 18%, and for most tradies selling the odd asset, the answer is often zero.
How CGT works
You calculate the gain (proceeds minus base cost), knock off the annual exclusion, apply the inclusion rate, and add the result to your taxable income for the year. CGT does not apply to trading stock (that is ordinary income), to genuinely private personal-use assets, or to certain exempt assets.
The annual exclusion
The first R50,000 of net capital gains in 2026/27 is tax free, up from R40,000 in 2025/26, per the Budget 2026 tax guide. In the year of death the exclusion rises to R440,000. The exclusion applies per year, not per asset: every disposal in the year shares the same R50,000.
Inclusion rates
- Individual (sole prop): 40% of the net gain is included. Maximum effective rate: 40% x 45% = 18%.
- Company: 80% included. Effective rate: 80% x 27% = 21.6%.
That difference is one more reason the choice of structure matters when you eventually sell up (see Sole Prop vs Pty Ltd vs Turnover Tax).
Recoupment comes first
On equipment and bakkies you have claimed wear and tear on, the first slice of any sale price is usually a recoupment of those allowances, taxed as ordinary income, not a capital gain. Only the portion of the price above the original cost is a capital gain. The mechanics are in Wear-and-Tear Allowances.
Selling the business at 55: paragraph 57 relief
The Eighth Schedule to the Income Tax Act, at paragraph 57, gives older owners a powerful exclusion when they dispose of a small business:
- You must be at least 55 (or the disposal must follow ill health, infirmity or death)
- The active business assets, or the whole business, must have a market value of no more than R15 million
- The exclusion covers up to R2.7 million of capital gains for 2026/27 (up from R1.8 million), per the Budget 2026 tax guide and SAIT
This is a lifetime cap, not a per-sale one. Used in full once, it is gone. For a tradie winding down after decades on the tools, paragraph 57 can wipe out the CGT on selling the yard, the plant and the goodwill: worth planning years ahead with a practitioner.
Your house and the home office
A primary residence enjoys a large CGT exclusion when you sell it. Budget 2026 announced an increase to that exclusion; confirm the current rand figure on SARS's CGT pages before relying on it. The catch for tradies: if part of the home was used for trade and you claimed home office deductions, the exclusion is apportioned, and CGT applies to the business-use share of the gain. Weigh the annual home office deduction against that future cost before claiming (see Tax Deductions for Tradies).
Worked example: selling a bakkie (2026/27)
A bakkie cost R250,000 and every rand of wear and tear has been claimed. It sells for R280,000:
- Recoupment: R250,000 (the allowances claimed come back into income)
- Capital gain: R280,000 minus R250,000 = R30,000
- The R30,000 gain is under the R50,000 annual exclusion: no CGT
The tax pain in that sale is the recoupment, not CGT. Sold for R200,000 instead, there is no capital gain at all, only a R200,000 recoupment.
Common mistakes
- Forgetting the recoupment. Most "CGT" on trade vehicles is actually ordinary income from recovered allowances.
- Treating paragraph 57 as per-asset. It is a once-in-a-lifetime R2.7 million pool.
- Claiming the home office blind. The deduction is small and annual; the lost residence exclusion can be large and once-off.
- Ignoring CGT in the company. A company's 21.6% effective rate plus dividends tax on the way out can beat up the proceeds badly.
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