Selling a property can bring a large gain and a large tax bill at the same time. Capital gains tax, CGT, is charged on the profit, not the sale price, so knowing how to work out the gain before you agree a price can save you from a surprise.

The rate and the base

Since 1 January 2023 the rate is 15% of the net gain on the transfer of property such as land and buildings, and of shares. The net gain is the selling price less your costs.

How the gain is worked out

Gain = sale price less the cost of the property less improvements less selling costs.

  • Cost is what you paid, plus the incidental costs of buying such as stamp duty and legal fees.
  • Improvements are capital works you made, such as an extension, with proof.
  • Selling costs include the agent's commission, legal fees and valuation fees.

If the result is a loss, there is no CGT; recent law also changed how capital losses can be used, so check the current rule.

A worked example

You bought a plot for KES 2,800,000 and paid KES 150,000 in stamp duty and legal fees. You spend KES 150,000 on a fence and a gate. You sell for KES 6,500,000 and pay KES 195,000 in agent and legal fees.

  • Total cost: 2,800,000 + 150,000 + 150,000 = KES 3,100,000
  • Gain: 6,500,000 - 3,100,000 - 195,000 = KES 3,205,000
  • CGT at 15%: KES 480,750

The capital gains tax calculator does this for you, and the free capital gains computation sheet works out several disposals at once.

Possible exemptions

Some transfers are not taxed, for example a sale of your own home that meets the conditions in the law, and transfers between spouses in some cases. The rules are detailed, so check them before you assume an exemption applies.

When and how to pay

CGT is declared and paid on iTax through the capital gains tax return, normally by the 20th of the month after the transfer. The land registry will ask for evidence that the tax was paid before it registers the transfer. Keep the payment receipt with the sale documents.

Documents to prepare

  • The sale agreement and the transfer
  • Proof of your original purchase price and costs
  • Receipts for improvements
  • Valuation report, if needed
  • Your KRA PIN and the buyer's

See the records every landlord should keep for how to organise them.

The buyer pays stamp duty; see stamp duty on property transfers. If the property was let, you may also need to file a final rental return and settle any monthly rental income tax. Compare the whole picture with the rental yield guide if you are deciding whether to sell or keep it.

Plan before you sell

Set aside the tax from the proceeds as soon as you receive them. A savings and sinking fund tracker keeps the amount visible, and the tax payments log holds the receipt.

The tax on a sale is only part of the picture. Stamp duty on property transfers explains what the buyer pays, land rates and county property charges explains the clearance certificate you will need, and capital gains tax increased to 15% explains how the rate changed. Keep the sale documents with the rest of your property records.

Rates, exemptions and procedures change. Confirm them with KRA or a registered adviser before you sign.