How much tax will you pay when you sell your business?

Ask ten owners what their business would sell for and most have a number in mind. Ask what that number becomes after tax and the room goes quiet. The gap between the two is decided less by the tax rates themselves than by decisions made months, sometimes years, before completion.

Here is how the pieces fit together in 2026/27.

The headline rates

Sell the shares in your company and you make a capital gain. For 2026/27, capital gains tax runs at 18% within your basic rate band and 24% above it, and on a gain of any size most of it will sit in the 24% band. The annual exempt amount is £3,000, which barely registers on a business sale.

Business Asset Disposal Relief (BADR) taxes qualifying gains at 18% for disposals from 6 April 2026, with a £1 million lifetime limit per person. Two things are worth being honest about:

1. It is worth less than it used to be. BADR was a 10% rate as recently as April 2025. At 18% against a main rate of 24%, the saving is now 6 percentage points, a maximum of £60,000 on a fully-used lifetime limit. Worth having, not worth organising your life around.
2. The conditions are unforgiving. Broadly, throughout the two years ending on the disposal you need to be an officer or employee of the company, the company must be trading, and you need at least 5% of the ordinary shares and voting rights. A reorganisation, a new share class for the family, or an incorporation done at the wrong moment can restart that clock. This is the single most common way sellers lose money without noticing.

A couple who both genuinely qualify each have their own lifetime limit. Whether the shareholding that achieves that was put in place two years early is, again, a question of timing.

Share sale or asset sale: the £100,000 question

The same headline price can produce very different bank balances depending on what is actually being sold.

A share sale means you personally sell your shares. One gain, one layer of CGT, potentially with BADR. The buyer takes the company with its history, and pays 0.5% stamp duty.

An asset sale means the company sells its trade and assets. The company pays corporation tax on the profits and gains first. Then, when you take the proceeds out of the company, you are taxed again, as dividends or on winding up. Two layers of tax instead of one.

Sellers therefore usually want a share sale. Buyers often want the opposite, because buying assets lets them leave the company's liabilities behind. Which way the deal goes is negotiated at the very start, at heads of terms, which is exactly when most owners have not yet spoken to their accountant.

Earn-outs: paying tax on money you have not received

Plenty of sales include deferred consideration: some money now, more later, often contingent on performance. Two traps live here.

First, where the future amount is uncertain, you can be taxed at completion on the value of the right to receive it, before the cash arrives. If the earn-out then underperforms, you have paid tax on money you never saw, and unwinding that is awkward.

Second, if the earn-out looks like a reward for you staying on and working, HMRC can treat it as employment income, taxed at income tax and National Insurance rates rather than capital rates. The difference between 18% and an effective rate in the forties is the kind of number that ruins the celebration dinner.

Both problems are structural. They are designed out before the sale agreement is signed, not argued about afterwards.

The quieter points that move the number

• HMRC clearances. Share-for-share exchanges and reorganisations usually justify advance clearance applications. They take weeks and are routinely remembered too late.
• What is in the company. Surplus cash, the company flat, the directors' toys: personal and non-trading assets in the business can complicate reliefs and put buyers off. Extracting them takes time and has its own tax cost, so it belongs in the plan early.
• An employee ownership trust is still a tax-favoured exit, but the relief was halved for disposals from late 2025, so anything you heard about "tax-free" EOT sales before then needs rechecking against current rules.
• Your records. Not a tax point, but the biggest practical one: buyers discount what they cannot verify, and hold back more of the price behind warranties when the numbers are untidy.

The uncomfortable summary

By the time you have agreed a price, most of the tax outcome is already fixed. The two-year BADR clock has either been running or it has not. The share structure either works or it does not. The deal is heading to shares or to assets. All of that is decided early, which is why the best time to talk to an accountant about selling is two or three years before you think you will.

If a sale is on your horizon, even a distant one, our selling your business page covers how we help with the tax and the numbers, and an early conversation costs nothing.

This article is general information, not advice for your specific circumstances. For advice you can act on, book a free consultation or call us on 0151 944 4342.