Selling a business triggers a capital gains tax liability that can run into hundreds of thousands of pounds. Understanding the rates, the reliefs available, and the planning options before you complete is essential — decisions made after the sale are far more limited than decisions made before it.
CGT rates on a business sale in 2026
The rate of CGT on a business sale depends on whether Business Asset Disposal Relief (BADR) applies:
- With BADR: 18% on qualifying gains up to £1 million lifetime (from April 2026 — increased from 14% in 2025/26)
- Without BADR, higher-rate taxpayer: 24% on gains
- Without BADR, basic-rate taxpayer: 18% on gains (or split if the gain spans tax bands)
What is Business Asset Disposal Relief?
BADR (previously known as Entrepreneurs' Relief) gives a reduced CGT rate on qualifying gains from the disposal of a business or shares in a personal company. To qualify as a shareholder, you must: have owned at least 5% of the ordinary share capital and voting rights for at least two years before sale, and have been an employee or director of the company throughout that two-year period.
The lifetime limit is £1 million of qualifying gains. Gains above £1 million — or gains that do not qualify for BADR — are taxed at the standard rate of 24% for higher-rate taxpayers.
BADR has become less valuable over recent years. The rate rose from 10% to 14% in April 2025 and to 18% in April 2026, while the lifetime limit was cut from £10 million to £1 million in 2020. For many business owners with significant gains, BADR now covers only a portion of the total tax bill.
Calculating your gain
The capital gain on a share sale is broadly: sale proceeds minus the original cost of the shares minus allowable costs (legal fees, corporate finance adviser fees, other transaction costs). For business owners who subscribed for shares at nominal value — 1p per share on a £1 million gain — the cost base is negligible and almost the entire proceeds are taxable.
For asset sales (selling the trade and assets rather than the shares), the calculation is asset by asset. Goodwill, property, plant and equipment all have separate cost bases and may attract different reliefs.
The planning window
The most important thing to understand about business sale tax planning is that most of the options require action before the sale completes — not after. Once the gain has crystallised, the options narrow significantly. The key pre-sale actions include:
- Ensuring BADR qualifying conditions are met (two-year ownership and employment period)
- Considering whether to sell shares or assets — the structures have different CGT consequences
- Reviewing whether any family members hold shares who could use their own BADR allowance
- Pension contributions in the year of sale to reduce adjusted net income
Post-sale planning: EIS CGT deferral
After the sale completes, EIS CGT deferral is the most powerful tool available. It allows you to invest the gain into EIS-qualifying companies and defer the tax bill — not pay it immediately. The investment must be made within three years of the gain arising.
On a £2 million gain, deferring via EIS saves £480,000 in CGT that would otherwise be payable the following January. The deferred gain is not eliminated — it crystallises when the EIS shares are sold. But the capital that would have gone to HMRC is instead invested productively, potentially for years, before the tax is eventually paid.
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