Tax when selling a business in the UK
Tax on selling a UK business: Capital Gains, Business Asset Disposal Relief, and the November 2024 budget changes. What to plan for and when.
Overview
Selling a business creates a capital gain, and that gain is taxable. The headline rate has been more favourable than ordinary income tax for decades thanks to Business Asset Disposal Relief (BADR, formerly Entrepreneurs' Relief), but the November 2024 Autumn Budget changed the picture. Understanding what you will actually pay, on what timeline, materially affects whether and when you sell.
This is an overview, not advice. The numbers below reflect the position as of the 2025-26 tax year. Always take specialist tax advice before a sale, especially because structure (share sale vs asset sale, earn-outs, family transfers) can shift the position significantly.
Information correct as of 29 May 2026, reflecting the 2025-26 UK tax year. Tax rules change at each Budget. Always check current rates with HMRC or a specialist tax adviser before relying on the figures below.
What gets taxed
When you sell a UK business, the difference between your sale proceeds and your original investment (plus allowable costs) is a chargeable gain for Capital Gains Tax (CGT) purposes. For most owner-managers, this gain is taxed at a special BADR rate rather than the standard CGT rate, subject to qualifying conditions.
Business Asset Disposal Relief (BADR)
BADR applies to gains on the disposal of all or part of a trading business: shares in your own company, partnership interest, or whole-business asset sale. Qualifying conditions in 2025-26:
- You have owned the business for at least 2 years immediately before sale
- For a company, you hold at least 5% of ordinary shares and 5% of voting rights
- You are an officer or employee of the company throughout the qualifying period
- The company is a trading company (not primarily investment)
There is a lifetime limit of £1 million on gains eligible for BADR. Gains above this limit are taxed at the standard CGT rate.
The rate changes from November 2024
The Autumn Budget 2024 announced:
- BADR rate increases from 10% to 14% for disposals on or after 6 April 2025
- BADR rate increases again to 18% for disposals on or after 6 April 2026
- Standard CGT rate is 24% (higher rate taxpayers) or 18% (basic rate taxpayers)
This is a meaningful change. A £1 million gain that would have produced a £100,000 tax bill in 2024 produces £140,000 in 2025-26 and £180,000 from 2026-27 onward.
Share sale vs asset sale
For limited companies, two main structures.
Share sale. The buyer acquires your company. Tax falls on you personally as shareholder (CGT, with BADR potentially applying). Cleaner from a transfer perspective; warranties typically wider.
Asset sale. The buyer acquires specific business assets (goodwill, equipment, contracts). The company makes the sale; the company pays Corporation Tax on the gain (typically 25%). You then extract the post-tax cash via dividend or company wind-up (further personal tax). BADR can apply to a winding-up if conditions are met.
Most buyers prefer asset sales (cleaner liability inheritance); most sellers prefer share sales (lower combined tax). The structure ends up as a negotiation point.
Earn-outs and deferred consideration
If part of the price is paid post-completion (earn-out), CGT timing depends on whether the earn-out is ascertainable or unascertainable at completion. Specialist advice is essential here, because getting it wrong can mean paying tax in year one on amounts you may never actually receive.
Family transfers
Selling or gifting to a family member can use Holdover Relief or Gift Relief, deferring the CGT charge to the recipient's eventual sale. This is a useful planning tool but requires careful timing and documentation.
A few things worth knowing
- The CGT bill is due by 31 January following the tax year of disposal (so a sale in April 2026 has CGT due January 2028)
- Sale proceeds go into your estate, potentially exposing them to Inheritance Tax; pre-sale IHT planning is worth doing
- VAT does not usually apply to a Transfer of a Going Concern (TOGC), but conditions apply
- If you have employees, Employer NI obligations may continue briefly post-sale depending on structure
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Frequently asked questions
- Why has BADR gone up?
- Government revenue raising. The 2024 Autumn Budget projected the rate increases would raise around £1.4bn per year by the end of the parliament. The change does not affect deals already completed before 6 April 2025.
- Should I rush to sell before April 2026?
- Only if you would have sold anyway. Selling primarily to avoid the rate increase rarely produces a good outcome; the price you accept under time pressure tends to be lower than what tax saving you would gain. Take advice on your specific position.
- What is the lifetime limit and can I split it?
- The £1 million BADR lifetime limit is per individual, not per business. Married couples can each claim up to £1 million. The limit applies across all qualifying disposals in your lifetime, so a previous business sale counts toward it.
- Do I need a tax adviser specifically for the sale?
- Yes, separate from your usual accountant if possible. Tax on business sales has specific complexities (BADR, Holdover, TOGC, earn-out treatment) that benefit from a specialist. The cost is typically £2,000 to £10,000 depending on complexity; the saving is usually multiples of that.
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