What Tax Will I Pay When I Sell My Business?

What tax do you pay when you sell a business in the UK?

When you sell a business, tax depends on who owns it and what is sold. Selling shares in your limited company may create a personal Capital Gains Tax (CGT) bill on your gain. If the company sells its business or assets, it may pay Corporation Tax, with further personal tax when shareholders take out the money. Sole traders and partners may pay CGT on qualifying business gains, although stock and other amounts can be taxed differently. Business Asset Disposal Relief (BADR) currently applies an 18% rate to qualifying gains, within an individual £1 million lifetime limit. Budget 2026 announced a proposed £500,000 limit from 6 April 2027, with legislation to follow. Your actual tax depends on eligibility, previous claims, ownership and the transaction terms.

The position at a glance

• Selling company shares? You may personally pay CGT on your gain.
• Your company selling its assets? Corporation Tax may arise, then further personal tax on extraction.
• Sole trader or partnership? Qualifying capital gains may attract CGT; other receipts can be taxed differently.
• Qualify for BADR? The current rate is 18%, subject to the lifetime limit and conditions.
• Unsure which applies? Ask your accountant before binding sale terms are agreed.

HMRC: Business Asset Disposal Relief and HMRC: company asset sales explain the distinction.

Will HMRC tax the whole amount I receive for my business?

No. The price paid for a business is not necessarily the taxable gain. Business value, the price agreed, the tax gain, tax payable, completion cash and eventual net proceeds are different figures.

Suppose you sell shares in a small engineering company for £350,000. That does not automatically make £350,000 your taxable gain. The calculation may include the acquisition cost of the shares, relevant allowable sale costs, capital losses, exemptions and other adjustments. A founder who acquired shares for a nominal sum can have a different base cost from someone who bought the shares in an established company. Not every amount invested in the company automatically becomes an allowable shareholder cost.

Taxable gain broadly means the amount calculated under the capital gains rules after relevant costs, adjustments and reliefs. The individual annual CGT exemption for 2026/27 is £3,000, subject to the applicable rules. It is not an exemption for the company or a fresh allowance for every asset. Do not estimate retirement proceeds by applying a tax percentage straight to a business valuation. See HMRC’s CGT rates and calculation guidance.

What is Business Asset Disposal Relief?

BADR is a CGT relief, formerly called Entrepreneurs’ Relief. It can reduce the rate on qualifying business gains, but it must be claimed. Ownership or retirement alone does not establish entitlement. Companies cannot claim personal BADR on their own asset disposals.

For qualifying disposals from 6 April 2026, the BADR rate is 18%. The individual lifetime qualifying-gains limit is currently £1 million; previous qualifying claims use up that limit. This is a limit on gains, not a maximum business selling price.

Earlier rates cannot be obtained simply by choosing a completion date for a new sale today. Standard individual CGT rates are generally 18% and 24%, depending on taxable income and gains. BADR is therefore not automatically a six-percentage-point saving: its benefit depends on the rate otherwise applicable. HMRC: work out your BADR tax.

What did Budget 2026 change about Business Asset Disposal Relief?

Announced change — subject to legislation. On 28 October 2026, the Government announced a reduction in the lifetime qualifying-gains limit from £1 million to £500,000 for qualifying disposals from 6 April 2027. The announced BADR rate remains 18%. As reviewed on 1 November 2026, official sources describe forthcoming Finance Bill 2026–27 legislation, not a limit already in force.

A £250,000 qualifying gain may produce no additional tax directly from this reduction where sufficient unused limit remains. A £750,000 qualifying gain may be affected because more could fall outside BADR. The relevant amount is the qualifying gain, not the asking price. Previous claims can change both outcomes.

The announcement deserves attention, not panic. BADR has not been abolished, and the £500,000 limit is not a business valuation ceiling. See HM Treasury: Budget 2026, HMRC: proposed new lifetime limit and Budget rates and allowances.

How much Capital Gains Tax could I pay if I sell my business?

This table compares current rules with the announced April 2027 limit, not enacted future law. It illustrates taxable gains, rather than sale prices.

Assumptions: One individual seller; full BADR eligibility within the relevant limit; no previous claims; an assumed 24% rate above the limit; no annual exemption, capital losses or other reliefs; no unusual tax circumstances. These are simplified illustrations, not personal tax quotations. Some non-BADR gains may instead be taxed at 18%, so actual results can differ.

Under these assumptions, shifting £500,000 of gains from 18% to 24% increases tax by up to £30,000 per individual. That is not a universal additional bill. The illustration does not calculate what a particular owner will keep.

Can I claim Business Asset Disposal Relief when selling my business?

Possibly, but the detailed conditions must be checked for your disposal. For ordinary limited-company shares, the relevant conditions generally need to be satisfied for at least two years: you must be an employee or office holder, and the company must qualify as a trading company or the holding company of a trading group.

The personal-company tests normally include at least 5% of ordinary share capital and voting rights, plus the relevant economic entitlement: at least 5% entitlement to profits and winding-up assets, or the qualifying alternative entitlement to disposal proceeds. Different rules can apply to qualifying Enterprise Management Incentive (EMI) shares. Dilution elections, reorganisations and changes in ownership need specialist attention.

Sole traders may qualify when disposing of all or part of a business after the required ownership period. Selling an isolated asset while continuing the same trade does not necessarily qualify. Where a business has ceased, additional conditions and normally a three-year window for qualifying asset disposals can matter. Partners’ gains and circumstances are assessed individually.

In a husband-and-wife or civil-partner business, each shareholder’s ownership history, role, economic rights and previous claims matter. Unequal holdings may produce different outcomes. One spouse qualifying does not establish the other’s entitlement, and marriage does not automatically double relief.

You do not need to retire to qualify, and retirement does not automatically make you eligible. Ask your accountant to check HMRC’s eligibility guidance against your actual shareholding and transaction.

Is selling my limited company different from selling its business and assets?

Yes. In a share sale, the owner sells shares and the buyer acquires the company, subject to the agreement. The individual shareholder may pay CGT and may qualify for BADR. In a company asset sale, the company sells specified assets and receives the proceeds itself.

Assets can include goodwill, stock, machinery, vehicles, equipment, intellectual property and transferable contracts or customer relationships. Their tax treatment is not necessarily identical.

A company selling assets does not automatically give shareholders an 18% BADR outcome. Nor does one structure always create more tax. Buyers may prefer selected assets to limit exposure to historic liabilities; sellers may prefer shares. Negotiate tax, contracts, employees, stock, working capital, continuity and completion costs together. Involve your accountant and solicitor before the structure becomes binding.

When does a business sale result in Corporation Tax?

A limited company selling assets may have taxable profits or chargeable gains. Corporation Tax does not automatically apply to the full selling price. Stock, goodwill and other intangible assets can have different rules from machinery or property.

Broadly, the small-profits rate is 19% for qualifying profits up to £50,000, and the main rate is 25% above £250,000, with marginal relief potentially available between them. Associated companies and short accounting periods reduce these thresholds; the company’s total taxable profits and eligibility also matter. These are not universal percentages to apply to a gross business price.

If the company sells its business for £500,000, shareholders do not therefore receive £500,000 tax-free. Getting money out can create further personal tax, depending on how it is extracted. Consider company and shareholder positions separately. Sources: HMRC company asset sales and Corporation Tax rates.

What tax do I pay if I am a sole trader selling my business?

Qualifying business assets and goodwill may produce CGT gains, potentially eligible for BADR. Stock and trading receipts can instead be subject to income-tax rules. Remaining business liabilities and VAT must also be considered.

For an established plumbing and heating business, first establish whether the owner trades personally or through a company. Vans, equipment, goodwill, employees and customer arrangements need separate attention. Reliable maintainable profits support a credible price; they do not themselves determine a tax gain.

What if I sell my share of a partnership business?

Each partner can have a different taxable gain and relief entitlement. Acquisition costs, ownership interests, previous claims and the assets included must be checked separately. Equal profit shares do not guarantee identical tax bills or entitlement to BADR. Each partner should obtain advice before agreeing the transaction.

When do I have to report and pay tax after selling my business?

The tax payment date is not necessarily the sale date. For a typical individual disposal in 2026/27 reported through online Self Assessment, the normal return and payment deadline is 31 January 2028. Registration obligations and other reporting routes may have earlier deadlines.

BADR requires a claim. Under HMRC’s published general claim rule, a qualifying 2026/27 disposal has a separate 31 January 2029 claim deadline. This later date does not postpone payment. The date follows the general rule in HS275; its current example table principally covers earlier tax years.

Special cases differ: UK residential-property gains can require reporting and payment within 60 days of completion, and non-residents face additional UK land/property reporting rules. Companies normally pay Corporation Tax nine months and one day after the accounting period ends, with different instalment rules for larger companies; the company return generally follows within 12 months. Your accountant should establish the applicable timetable.

Deferred consideration means money paid later. Fixed instalments do not necessarily postpone CGT until each payment arrives. Conditional payments, earn-outs and other arrangements have different consequences. Ask how much tax is due, when it must be paid and whether completion cash covers it. See HMRC reporting and payment, BADR claims, HS275 and Corporation Tax payment deadlines.

HMRC distinguishes different forms of deferred consideration. In certain circumstances a seller may request payment of CGT by instalments, but conditions apply; do not assume a deferred price automatically gives deferred tax.

Is VAT payable when I sell my business?

Some asset sales attract VAT. A qualifying Transfer of a Going Concern (TOGC) is normally outside the scope of VAT, not a zero-rated sale. It is not simply optional treatment where the rules apply.

The conditions include transfer of a continuing business, the buyer’s intention to carry on the same kind of business and relevant VAT-registration requirements. Property and options to tax can complicate matters; stock and other assets must be considered within the transfer. Transferring a VAT registration also needs care.

For an independent shop, identify stock value, goodwill, premises and whether the owner is a sole trader or company. Check TOGC treatment before stating the price or signing documents. Not all business sales are VAT-free. HMRC VAT Notice 700/9.

Does owning the business premises affect the tax I pay?

Yes. A personally owned freehold, company-owned property, leasehold premises and property held separately from the business can create different issues. Leasing property back to a buyer adds another question.

An associated disposal of personally owned premises may qualify for BADR only if the statutory conditions are met. Restrictions can apply where rent was charged to the business; occupation by your company does not automatically establish eligibility. A retiring engineering shareholder should review machinery, any freehold and the share-versus-asset structure together.

The buyer’s property transaction taxes are separate from the seller’s CGT or Corporation Tax. CGT and BADR broadly operate across England, Scotland, Wales and Northern Ireland, but property transaction taxes differ between jurisdictions. This guide is not a commercial-property tax assessment. See HMRC HS275 associated disposals.

Are there other ways to sell or transfer a business?

Third-party sales, management buyouts, family succession, partial disposals and Employee Ownership Trusts (EOTs) have different commercial and tax consequences. The appropriate route depends on funding, continuity and your objectives.

For qualifying EOT disposals on or after 26 November 2025, 50% of the gain is chargeable to CGT; the remaining 50% is held over into the trustees’ acquisition cost. BADR and Investors’ Relief are unavailable where EOT relief is claimed on that disposal. Do not describe current EOT sales as automatically tax-free. See HMRC EOT relief reduction and our EOT succession article with an updated tax explanation.

Budget 2026 also proposed separate Founders’ Relief: a 10% CGT rate on up to £10 million of eligible gains from 6 April 2027 for qualifying founders and significant early investors in certain high-growth, innovative companies. It remains subject to consultation and legislation. This is not ordinary BADR, nor something every small-business founder can claim. See the official technical consultation.

How much money will I actually keep after selling my business?

Your headline price is not your net proceeds. Consider tax, professional fees, borrowing, liabilities, working-capital and stock adjustments, deferred payments, earn-outs, guarantees, warranties, indemnities and handover commitments. An earn-out is payment linked to future performance.

Conceptually: headline price − relevant taxes − professional costs − applicable liabilities and deal adjustments = eventual net proceeds, subject to the transaction structure and payment terms. This is a planning aid, not a universal legal or tax formula.

Imagine Buyer A offers £450,000, substantially paid at completion, subject to normal adjustments. Buyer B offers £500,000, but £150,000 is deferred and partly dependent on future performance. The higher headline may be less attractive once funding certainty, security, timing and risk are examined. Neither is automatically better.

For two spouses owning a service company, each shareholder’s net proceeds may differ because ownership and tax histories differ. Review the deal as well as each individual position. Read why a valuation is not the same as deal value.

Should I sell my business before the BADR changes in April 2027?

Review the announced change promptly with your accountant if you are considering a sale. Do not sacrifice business value just to meet an anticipated tax deadline. Losing £50,000 through a poor offer to avoid an illustrative £15,000 extra tax bill is not automatically a better result.

An unqualified buyer, excessive deferral, insecure funding, unnecessary earn-outs, weak financial records or late lease problems can cost more than a theoretical tax saving. Establish an acceptable price and terms, not simply a deadline.

The tax disposal date can differ from completion. Proposed anti-forestalling rules address certain unconditional but uncompleted contracts and share reorganisations. Signing Heads of Terms does not guarantee the earlier limit. Never rely on backdating or artificial arrangements. Obtain specialist advice on the announced timing provisions. Our exit-timing guidance considers the wider decision.

Before calculating tax, do you know what your business is worth?

Turnover alone does not establish market value. Two businesses with the same sales can command different prices because maintainable profit, supportable earnings adjustments, owner dependence, recurring revenue, customer concentration and contracts differ.

Staff continuity, premises, equipment, goodwill, working capital, trading trends, buyer demand, funding and investment needs also matter. A £600,000 cleaning-company sale needs evidence of sustainable earnings and transferable customer relationships, not a tax calculation based solely on turnover.

BuyMyBiz provides business-sale advice: valuation, preparation, buyer identification and negotiation. Your accountant provides the individual tax assessment. What could your business actually sell for? Get My Free Sale Appraisal before making decisions about retirement or tax. You can also read why valuations vary.

Thinking of selling your business? Start with these steps

1. Establish when and why you want to sell.
2. Understand realistic market value.
3. Identify shares versus business assets.
4. Review ownership and shareholder arrangements.
5. Ask your accountant to check BADR eligibility and previous claims.
6. Estimate tax and payment dates.
7. Review accounts and management figures.
8. Identify buyer concerns.
9. Check contracts, leases and liabilities.
10. Define acceptable cash and other terms.
11. Prepare for confidential buyer discussions.
12. Obtain tax and legal advice before binding arrangements.

Start with manageable preparation, not a last-minute document exercise. Our preparing-to-sell guidance, preparation checklist and exit-planning article provide the next steps.

Frequently asked questions

What tax will I pay when selling my business?

Individuals may pay CGT on gains; companies selling assets may pay Corporation Tax, with further personal tax on extraction. Ownership, structure and eligibility determine the outcome.

Is CGT payable on the full sale price?

Not necessarily. CGT concerns the gain calculated under the applicable rules, after relevant costs, adjustments, losses and exemptions.

What is Business Asset Disposal Relief?

BADR, formerly Entrepreneurs’ Relief, applies a preferential CGT rate to qualifying business gains within an individual lifetime limit. It must be claimed.

What is the current BADR rate?

For qualifying disposals from 6 April 2026 it is 18%. The earlier 10% and 14% rates are historical.

How has Budget 2026 changed BADR?

It announced a proposed lifetime qualifying-gains limit of £500,000 from 6 April 2027, down from £1 million. The rate remains 18%; legislation was still forthcoming at our review date.

Will my sale qualify for BADR?

Not automatically. Business, ownership, holding-period and other conditions must be checked, including each shareholder’s position and previous claims.

What if my business sells for less than £500,000?

Price is not the same as qualifying gain. A £300,000 sale may fall within an unused limit, but eligibility, costs and prior claims still need checking.

Do shares and company assets have different tax outcomes?

Often. Shareholders selling shares consider personal CGT; companies selling assets consider Corporation Tax and then the tax on withdrawing the proceeds.

Can sole traders claim BADR?

Potentially, for qualifying disposals of all or part of a business. An isolated asset sale while continuing the same trade does not necessarily qualify.

Is VAT payable on a business sale?

Some asset sales attract VAT. A qualifying TOGC is outside its scope, subject to conditions; not every sale qualifies.

When must I pay HMRC?

A typical 2026/27 individual disposal through online Self Assessment is payable by 31 January 2028. The separate BADR claim deadline is generally 31 January 2029. Special reporting rules can apply.

Should I rush to sell before April 2027?

No. Review the announced change with your accountant, but compare any tax effect with value, buyer funding, payment risk and suitable terms.

Official sources and review

Reviewed against official guidance on 1 November 2026. HMRC is the primary tax authority. The Budget and rates annex were published on 28 October 2026, the BADR change paper on 29 October 2026, and the EOT policy paper on 26 November 2025. HS275 2026 principally covers 2025/26 disposals; its general claim rule supports the later deadline illustrated above.

The linked HMRC eligibility, calculation, claim, CGT, Corporation Tax, VAT and Budget references support the relevant sections. Recheck enacted legislation, final lifetime-limit provisions and anti-forestalling rules before 6 April 2027; afterwards revise the current-versus-historical explanation while retaining this guide’s original publication date and permanent address. No tax changes are published automatically.

Important tax information

This guide provides general information about UK business-sale taxation and BADR. It is not personal tax, legal or financial advice. Treatment depends on individual circumstances, ownership, previous claims, structure and legislation. BuyMyBiz advises on valuations, preparation, buyer identification and sale negotiations. Before binding arrangements, obtain advice from a suitably qualified accountant, specialist tax adviser and solicitor as appropriate.