Tax on selling a business

Before anything else

This is general information on the UK tax rules for the 2026 to 2027 tax year, written for UK resident individuals who own shares in a UK trading company. It is not tax advice, it does not cover non-residents or trusts, and it does not replace a tax adviser looking at your situation.

Tax planning happens before you commit to a structure. Some reliefs need conditions to have been met for two years before the sale; others need HMRC clearance, which takes time. The analysis should also cover risk, costs and what you plan to do with the money, not just the headline rate.

The two ways to sell, and why it matters

Share sale

You sell your shares in the company. The gain is taxed on you personally, and the buyer acquires the company with all its assets, contracts and liabilities. The buyer pays stamp duty of 0.5% on the price for the share transfer.

For the buyer this means inheriting the company's full history, including past tax and employment exposures. That is why due diligence goes deeper and the share purchase agreement contains more extensive warranties and a tax covenant.

Asset sale

The company sells its trade and assets and keeps the proceeds. The gain is taxed in the company at corporation tax rates of up to 25%. Getting the money out to you then creates a second layer of tax: as dividends at up to 39.35%, or as a capital distribution in a members' voluntary liquidation, which can qualify for capital gains treatment subject to anti-avoidance rules.

A buyer can choose which assets and liabilities to take, but the assets do not always come clean. Employees usually transfer automatically under TUPE, and the transfer of the business as a going concern can be outside the scope of VAT if the conditions are met. Contracts, licences and leases need consent or assignment.

Most owner-managers prefer a share sale because the tax is paid once, at capital gains rates. Many buyers prefer assets. The structure is part of the commercial negotiation, so compare the net outcome for both sides before agreeing it.

Selling shares as an individual: Capital Gains Tax

Your gain is the sale proceeds less your base cost, which is usually what you paid for the shares plus allowable acquisition costs. Capital Gains Tax rates on shares were raised on 30 October 2024 and are as follows:

Annual exempt amount for 2026 to 2027: £3,000.

The 18% rate only applies to the part of your basic rate band left after your taxable income. On a company sale most of the gain is taxed at 24%.

If you set up the company yourself, your base cost may be as little as £1 per share. If you inherited the shares or bought them later, it is their value at that time. Do not assume it is the nominal share capital.

The costs of the sale, including your M&A adviser's and solicitor's fees, are deductible if they relate directly to the disposal and you can evidence them. Keep the invoices. Capital Gains Tax on shares is reported through Self Assessment and paid by 31 January after the end of the tax year in which the sale completed.

Business Asset Disposal Relief

Business Asset Disposal Relief, formerly Entrepreneurs' Relief, reduces the rate on qualifying gains up to a lifetime limit of £1m. The rate has risen in two steps:

Lifetime limit of qualifying gains: £1,000,000.

From 6 April 2026 the relief rate is the same as the basic CGT rate, so the saving now comes only from the 6 points between 18% and 24%. On the full £1m allowance that is worth £60,000. To qualify on a share sale, you must have held at least 5% of the shares, voting rights and economic rights, and been an officer or employee of a trading company, throughout the two years before the sale. Our guide to Business Asset Disposal Relief covers the conditions and the traps.

A worked example

A higher rate taxpayer sells 100% of a company for £722,400 in the 2026 to 2027 tax year. She subscribed £100 for the shares on incorporation and paid £45,000 of documented sale costs. She has never used Business Asset Disposal Relief and qualifies for it.

Without the relief the tax at 24% would be £161,832, so the relief saves £40,458. Had the sale completed before 6 April 2026, at 14%, the tax would have been £94,402. Our valuation tool gives you a value range to start from.

Selling through a holding company

If your shares are held by a holding company, the gain arises in that company. Under the Substantial Shareholding Exemption, a company that sells a holding of at least 10% in a trading company, held for a continuous 12 months, pays no corporation tax on the gain.

The money then sits in the holding company. Paying it out to you as dividends triggers dividend tax at up to 39.35%, so the structure suits owners who plan to reinvest through the company or draw the money down slowly. It does not suit someone who needs the cash personally straight away.

Moving shares into a new holding company shortly before a sale is a share-for-share exchange. It needs genuine commercial reasons, and advisers normally apply to HMRC for advance clearance first. With a buyer already in view, take specialist advice before changing the structure.

What you can plan, and when

Selling to an Employee Ownership Trust

You sell a controlling interest to a trust that holds the shares for all employees. For sales from 26 November 2025, half of the gain is exempt and held over in the trust, and the other half is taxed at normal CGT rates, without Business Asset Disposal Relief on that half. For a higher rate taxpayer that is an effective rate of about 12%. Since 30 October 2024 the trustees must be UK resident, fewer than half of them can be former owners of the company, and the trustees must take reasonable steps to make sure they pay no more than market value. The relief can be clawed back if the conditions are broken before the end of the fourth tax year after the sale. The price is usually paid over several years out of company profits.

Deferred consideration and earn-outs

If part of the price is fixed but paid later, you are normally taxed on the whole amount in the year of the sale. Where it is paid over more than 18 months, you can ask HMRC to let you pay the tax in instalments. An earn-out whose amount is not known at completion is treated differently: the right to receive it is valued and taxed at completion, and any later difference is a separate gain or loss. The drafting decides the treatment, so agree it with your tax adviser before signing.

Shares or loan notes from the buyer

If you take shares or loan notes in the buyer as part of the price, the gain on that part can usually be rolled over until you sell them. The interaction with Business Asset Disposal Relief is technical and sometimes requires an election to crystallise the relief at completion.

Spouses and civil partners

Transfers between spouses are free of CGT, and each spouse has their own annual exempt amount and £1m relief allowance. To claim the relief, though, the spouse must personally meet the 5% and officer or employee conditions for the two years before the sale.

Inheritance tax

While you own shares in an unquoted trading company they can qualify for Business Relief from inheritance tax: 100% on the first £2.5m of qualifying assets from 6 April 2026 and 50% above that. Once you sell, the cash has no such relief. If passing the business to the next generation is a realistic alternative, compare both routes in full before deciding to sell.

The timetable that matters

Not every option has a fixed deadline, and starting early does not guarantee a relief. Use this table to know when the analysis should start:

The practical conclusion is simple: bring in your tax adviser before you sign heads of terms, while you can still compare structures without reopening a negotiation that is already under way.

Official sources and scope

Rates and conditions checked against GOV.UK and HMRC guidance in October 2026:

• GOV.UK: Capital Gains Tax rates and allowances.
• GOV.UK: Business Asset Disposal Relief and HS275 (2026).
• HM Treasury and HMRC: Employee Ownership Trusts relief reduction and changes from 30 October 2024.
• HMRC Capital Gains Manual: Substantial Shareholding Exemption and payment by instalments.
• GOV.UK: stamp duty on shares, dividend tax and corporation tax rates.

This content is for information and does not replace tax, legal and employment advice on your transaction.

Frequently asked questions