When you sell a UK limited company, the gain. The difference between what you receive and what you originally paid for your shares. Is subject to capital gains tax (CGT). For higher and additional rate taxpayers, the standard rate is 24% on business asset disposals as of April 2026. Business Asset Disposal Relief (BADR) reduces this to 18% on the first £1m of qualifying gains. How the deal is structured. Share sale versus asset sale. Affects your tax position significantly.
Share sale versus asset sale: why it matters
In a share sale, you sell your shares in the company. The company itself. Including all its assets, contracts, liabilities, and employees. Transfers to the buyer as part of the deal. CGT applies to the gain on your shares. This is the preferred structure for most sellers.
In an asset sale, the company sells its underlying assets (plant and equipment, contracts, goodwill, customer lists) to the buyer, and the proceeds sit inside the company. Extracting those proceeds as a dividend or salary creates an additional tax charge. Asset sales are more common when a buyer wants to cherry-pick assets and leave liabilities behind, or when the target company has historic tax or legal issues the buyer does not want to acquire.
For most owner-managed businesses, a share sale is the more tax-efficient structure. Buyers occasionally push for asset sales. Be aware this is a negotiating point with tax consequences.
Current CGT rates (April 2026)
| Gain type | Rate |
|---|---|
| Business assets. First £1m (BADR eligible) | 18% |
| Business assets. Above £1m lifetime limit | 24% |
| Residential property (higher rate taxpayer) | 24% |
| Other assets (higher rate taxpayer) | 24% |
The annual CGT exempt amount is £3,000 per individual for 2026/27.
How to calculate your capital gain
Your capital gain is the sale proceeds minus your base cost. Base cost is typically the amount you originally paid for the shares. For a founder who incorporated a company with a nominal £100 share capital and is now selling for £5m, the gain is effectively £5m minus £100.
Deal structures can affect what counts as proceeds. If part of the consideration is deferred. Paid over time depending on business performance (an earn-out) the tax treatment of that deferred element needs careful planning. HMRC requires you to assess the value of deferred consideration at the time of disposal, even if it has not been received.
Planning considerations
Start the planning conversation with a tax adviser well before you go to market. Ideally 12 to 18 months before any expected transaction. Key areas to address:
BADR eligibility. Verify that you will qualify. Shareholding percentage, two-year holding period, trading company status.
Spouse's allowance. If your spouse also holds qualifying shares, they have a separate £1m BADR lifetime limit. Structuring shareholdings to use both allowances can save up to £60,000 in additional CGT (the difference between BADR at 18% and the standard rate of 24% on a £1m gain).
Pension contributions. Large pension contributions in the years before a sale can reduce your adjusted net income and affect your income tax position. Take advice.
Timing the disposal. The tax year in which the transaction completes determines when the CGT is payable (31 January following the end of the tax year). For large transactions, there may be cash flow reasons to time completion to straddle a tax year end.
Frequently asked questions
When do I pay CGT on a business sale? CGT is due by 31 January following the end of the tax year in which the transaction completed. For a sale completing in July 2026 (tax year 2026/27), CGT is due by 31 January 2028.
Do I pay income tax as well as CGT when I sell my business? A clean share sale generates a capital gain. Not income. However, if you receive any consideration structured as a management fee, consultancy payment, or salary for post-completion services, those elements are taxed as income. Take advice on how consideration is structured in the heads of terms.
What if I sell the business assets rather than my shares? The company pays corporation tax on any gain on its assets. Extracting the proceeds from the company as a dividend or salary creates additional personal tax. The combined effective tax rate on an asset sale is typically significantly higher than a share sale. This is why most sellers strongly prefer share sales.
Does the annual CGT exemption apply? Yes. The £3,000 annual exemption applies to business disposals in the same way as any other capital gain. On a transaction of several million pounds, the annual exemption has a minimal impact.
Is there any way to defer CGT on a business sale? There are limited deferral routes. Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) reinvestment relief can defer gains in specific circumstances. These are complex and need specialist advice before any transaction completes.