Selling your business: how capital gains tax works in 2026, and the small business exclusion
When you sell a business for more than it cost you, the profit is a capital gain and part of it is taxed. The 2026 Budget raised several exclusions, so the tax bill on a sale may be lower than you expect, especially if you are 55 or older.
In short
- Only part of a capital gain is taxed. For individuals the maximum effective rate is 18%, for companies 21.6% and for most trusts 36%.
- Individuals get an annual exclusion of R50,000 (up from R40,000) from the 2026/27 year.
- An owner aged 55 or older who sells a small business can exclude up to R2.7 million of the gain, if the market value of the business assets is R15 million or less. Further conditions apply.
- The tax point is when the sale agreement is signed, not when transfer is registered.
- A sale is a transaction, so the negotiation and structuring belong with a corporate finance adviser.
How the tax works
A capital gain is the sale price minus what the asset cost you, plus certain costs. Only a portion of the gain is added to your taxable income. That portion, called the inclusion rate, is 40% for individuals, so the highest effective rate is 18% (40% of the top personal rate of 45%). The maximum effective rates are:
| Seller | Maximum effective rate |
|---|---|
| Individuals and special trusts | 18% |
| Companies | 21.6% |
| Other trusts | 36% |
The gain is taxed in the tax year in which the sale agreement is signed. For property and businesses, that is when you sign, not when transfer or payment happens. If you sign in February and receive the money in May, the gain falls in the earlier tax year, so time it deliberately.
The exclusions
Individuals can reduce the taxable gain with several exclusions. The 2026 amounts, applying from 2 March 2026, are:
| Exclusion | Amount | Previous |
|---|---|---|
| Annual exclusion | R50,000 | R40,000 |
| Primary residence | R3 million | R2 million |
| Death | R440,000 | R300,000 |
| Small business disposal (owner aged 55 or older, business assets with a market value of R15 million or less) | R2.7 million | R1.8 million |
The R15 million market value ceiling was raised from R10 million. Companies do not get the annual exclusion. Further conditions apply to the small business exclusion, so check them before you rely on it.
A worked example
An owner aged 58 sells a small business at a capital gain of R3.5 million. The business assets are worth less than R15 million and she meets the other conditions.
| Step | Amount |
|---|---|
| Capital gain | R3,500,000 |
| Less small business exclusion | R2,700,000 |
| Less annual exclusion | R50,000 |
| Net capital gain | R750,000 |
| Included in taxable income at 40% | R300,000 |
| Tax at the top rate of 45% (a maximum) | R135,000 |
Without the small business exclusion, the net gain would be R3,450,000, R1,380,000 would be included, and tax at 45% would be up to R621,000. The difference, about R486,000, is why the conditions matter. The example assumes she is taxed at the top marginal rate. If her other income is lower, her tax will be lower.
Asset sale or share sale
- Sale of shares. The seller is the shareholder, and the buyer takes over the company as it is. The gain is on the shares.
- Sale of assets. The company sells its assets, and the company pays tax on the gain and on any recouped allowances. The owner is taxed again when the money comes out.
Buyers often prefer assets, and sellers shares, so the structure is part of the negotiation. VAT and transfer duty can also apply. A going-concern sale can be zero-rated for VAT if the conditions are met. Take advice before you sign.
What to do now
- Note the tax point. The date the agreement is signed decides the tax year.
- Get an independent valuation of the business, which supports your price and your tax position.
- Check the small business exclusion conditions if you are 55 or older.
- Ask which structure suits you, shares or assets, before the offer is accepted.
- Bring in an adviser early. Selling is a transaction, and the negotiation, the buyers and the structure sit with our corporate finance colleagues at Caban Corporate Advisors. We can hand over cleanly from the accounting and tax side.
Frequently asked questions
Is all of the gain taxed?
No. Only 40% is included for individuals, after exclusions, and it is taxed at your marginal rate.
Does the exclusion apply to a company selling assets?
No. The small business exclusion is for individuals, and companies do not get the annual exclusion.
What if I sell in instalments?
The gain is generally taxed when the agreement is signed. Get advice on how instalments are treated in your case.
Sources and further reading
- Budget 2026 Frequently Asked Questions (capital gains tax rates and exclusions), South African Revenue Service
- South Africa, Individual: income determination (capital gains tax), PwC Worldwide Tax Summaries
This article is general information for South African businesses. It is not tax, legal or financial advice, and it reflects the rules and figures at the date shown above. Tax rules change, so confirm the current position before you act. TBL's practitioners are registered tax practitioners.