Tax When Selling Your Business in the UK

Selling your business will probably be the single largest financial event you ever undertake. It is not just about agreeing a headline price and handing over the keys. The tax treatment of the deal will materially affect your net proceeds, your future planning and even the timing of the exit. A mis-step can cost tens or hundreds of thousands of pounds, or worse, leave you facing penalties, interest and unexpected bills.

This guide explains the main UK taxes that can apply when selling a business, how asset and share sales differ, the key reliefs, planning steps that make a difference and common pitfalls to avoid. Use it to approach tax proactively so you keep more of what you have built.

At Dexterity Partners, we treat tax as a design principle from day one, not a last-minute hurdle. Our integrated model brings corporate finance, tax and legal advice together with our partner law firm, 3Volution. That means the structure, the documents and the negotiation move in step, so the deal you want is also the deal that clears cleanly and tax-efficiently.

Which taxes may apply when you sell a UK business

The taxes that bite depend on what you sell, who sells it and how long you have owned it. For most owner-managed businesses, four areas matter.

Capital Gains Tax (CGT) for individuals

If you sell shares in your company or you dispose of business assets you own personally, you may be within CGT. Your gain is the sale proceeds minus your base cost and allowable costs. Qualifying business disposals can benefit from reliefs such as Business Asset Disposal Relief (BADR) (see below), which applies a reduced CGT rate to eligible gains. HMRC’s Business Asset Disposal Relief page confirms that from 6 April 2025 qualifying gains are taxed at 14% and that the rate was 10% for disposals on or before 5 April 2025, with a further increase to 18% from 6 April 2026 now legislated.

Corporation Tax for companies

If the company sells assets such as a trading business, property, goodwill, plant or stock, any gain and revenue profits are usually taxed on the company. You then have a second step if you want to extract the proceeds personally, which can create extra tax compared with a simple share sale.

Income tax in specific situations

Parts of some deals can be taxed as income and not capital. Examples include amounts treated as remuneration, certain termination payments, or earn-out arrangements structured in a way that is taxed as income. These are less common in a clean share sale but crop up often enough to plan for.

Stamp Taxes

Stamp duty is charged on transfers of shares in a UK company above the threshold. Stamp Duty Land Tax applies if the transaction involves UK land and buildings. These amounts are usually modest in the context of a mid-market sale but you should still confirm who pays and price accordingly.

Asset Sale vs Share Sale: Why Structure Matters

In an asset sale the buyer purchases selected assets and liabilities. Buyers often prefer this, as it lets them cherry-pick what they want and ring-fence historical risks. For sellers, an asset sale can be less tax-efficient. If a company sells its trade and assets it will pay corporation tax on any gains and profits. If you then distribute the proceeds to shareholders there may be further tax charges.

In a share sale you sell your shares in the company. For many owner-managers this is cleaner and often more tax-efficient, because it is typically one charge to CGT on your share gain, potentially at the reduced BADR rate if you qualify. Share sales are also usually quicker to execute because the contracts that underpin the business need fewer assignments. That said, the buyer inherits the whole company, so there is often more due diligence and warranty cover.

How deal mechanics change the tax outcome

The way consideration is calculated and paid matters just as much as the headline price.

Allocation across assets. In an asset deal, the price is split across stock, plant and machinery, fixtures, goodwill and property. Pushing too much value into categories that do not attract favourable treatment can increase the overall tax cost for the seller. Goodwill and qualifying intangibles can be more favourable from a CGT perspective than stock or short-life assets.

Earn-outs and deferred consideration. If part of the price is payable later or depends on performance, you should model the tax timing. Depending on structure you might be taxed upfront on the value you receive, or later as amounts crystallise. The drafting in the sale agreement and any loan note or share exchange needs to be aligned with the tax model.

Share-for-share and loan-note structures. In a share sale, consideration in the form of new shares or certain qualifying loan notes can defer CGT until you dispose of those instruments. This can be helpful if you are rolling equity into the buyer group. The detailed conditions and anti-avoidance rules need checking before heads of terms are signed.

Group structures. If you hold the trading company through a holding company, you may have access to corporate reliefs such as the Substantial Shareholdings Exemption when the holding company sells a trading subsidiary. Used well, this can eliminate a company-level gain, allowing cleaner cash extraction planning thereafter.

Reliefs and Exemptions That Can Protect Value

Business Asset Disposal Relief (BADR)

BADR reduces the CGT rate on qualifying gains within a £1 million lifetime cap per individual. The rate is 10% for disposals on or before 5 April 2025, 14% for disposals from 6 April 2025 to 5 April 2026 and is scheduled to rise to 18% for disposals on or after 6 April 2026. Conditions include that the company is trading, you hold at least 5% of ordinary share capital and voting rights, and you satisfy the two-year holding and employment/officer tests before disposal.
What to remember:

• BADR reduces the rate, not the gain. Valuation, base cost evidence and clean working capital mechanics still matter.
• The lifetime cap is per individual. Thoughtful shareholdings across spouses or civil partners can help use more than one allowance if introduced well in advance and for genuine commercial reasons.
• The two-year clock catches people out. If you have recently reorganised the cap table, check from when the holding period runs.

Substantial Shareholdings Exemption (SSE)

Where a company disposes of a substantial shareholding in a trading company and conditions are met, the company-level gain can be exempt from corporation tax. This is particularly relevant if you have organised your business under a holdco/subsidiary structure ahead of a future exit. It can also be useful if you sell a non-core division first.

Rollover, holdover and reinvestment reliefs

There are situations where you can defer or roll gains into other qualifying business assets or structures. The practical use of these is narrower in modern owner-managed exits than many expect, but they can still be valuable in specific scenarios such as staged disposals, intra-family succession or where you retain a property used in the trade.

Practical planning that moves the needle

Tax-efficient exits are built over years, not weeks. Three to five years out is not too early to start. The earlier you begin, the more options you have.

1. Choose and prepare the right route to market. If the goal is a share sale at completion, clean up non-trading assets, remove personal items from the balance sheet and resolve historic quirks that frighten buyers or push deals into asset-sale territory.
2. Get the ownership and employment details right. Make sure qualifying managers hold their shares in the right way and meet the two-year tests for BADR. Sort out option schemes and leaver provisions early so you are not trying to fix them under exclusivity pressure.
3. Build a saleable group structure. A simple holdco owning the trading company can open up corporate reliefs and flexibility in how you sell. Do this well before any sale conversations and take advice so reconstructions are tax-neutral where possible.
4. Plan timing around tax-year dates and announced changes. CGT and BADR rate steps happen on specific dates. If you are already sale-ready, bringing a completion forward by a few weeks can lock in a materially better rate, and the reverse can also be true if the buyer needs more time and is paying a premium for that flexibility. The confirmed changes to the BADR rate from April 2025 and April 2026 have made timing analysis a standard workstream.
5. Align the legal drafting with your tax model. Earn-out definitions, adjustment mechanisms, loan-note terms, warranties on tax covenants and completion statements must all match the intended tax treatment. This is where having Dexterity and 3Volution in the same room pays off.
6. Model extraction to personal hands. In an asset sale you face both company-level tax and personal tax when distributing proceeds. In a share sale it is usually a single CGT charge. Always model cash-to-hand under both routes so you can compare like for like.
7. Do not forget international elements. Overseas buyers, non-UK subsidiaries or sellers moving country can trigger withholding taxes, local filings and exit-charge rules. Early specialist advice avoids unpleasant surprises and can be priced into the deal.

This is exactly what our Fit to Sell analysis covers. It identifies tax and structural blockers early, prioritises fixes and reads across into buyer messaging so you do not give discounts for solvable issues. Our Fit for the Future process then ensures your governance, contracts, IP and legal housekeeping are robust, which boosts buyer confidence and supports cleaner tax outcomes.

Common Tax Pitfalls that destroy value

• Leaving tax until exclusivity. By the time heads of terms are signed, your leverage to change structure has dropped. Sort the structure and eligibility early.
• Misallocating price in an asset deal. Too much value pushed into stock or short-life assets and you may pay more tax than necessary. Negotiate the allocation, do not just accept a buyer schedule.
• Missing BADR conditions. Common failures include holding under the 5% threshold, not being an employee or officer, and restructuring too close to completion so the two-year clock is not met.
• Poor documentation of base costs and valuations. If HMRC asks, you need evidence. Inadequate record-keeping can increase a gain on paper and cost real cash.
• Advisers working in silos. Deals lose value when corporate finance, tax and legal advice pull in different directions. Integrated teams reduce re-drafts, delays and risk.
• Underestimating reporting and payment deadlines. Late or incorrect filings attract penalties and interest. Build the post-completion tax work into your timetable and responsibility matrix.

Integrated project management avoids these traps and keeps your deal clean.

Example: Share Sale vs Asset Sale

Example 1: Straight share sale with BADR

You own 100% of a trading company and sell all your shares for £2,000,000. Your base cost and allowable costs total £500,000, so the gain is £1,500,000. You meet BADR conditions.

• If your completion is on or before 5 April 2025, BADR applies at 10% up to the £1,000,000 lifetime cap, so £100,000 tax on that portion. The remaining £500,000 of gain is taxed at prevailing CGT rates for shares outside BADR.
• If your completion is between 6 April 2025 and 5 April 2026, the BADR slice is taxed at 14%. If you have £1,000,000 of unused BADR capacity, that is £140,000 on that slice.
• From 6 April 2026, the BADR rate moves to 18%. That same £1,000,000 BADR-eligible slice would then carry £180,000 of CGT.

For many Dexterity clients with profits between £500k and £5m, these rate steps alone can shift six-figure sums. Timing, readiness and clean documentation make the difference.

Example 2: Asset sale inside the company vs share sale

Assume a buyer prefers an asset purchase. Your company sells its trade and assets for £2,000,000. After deducting tax-deductible costs and base costs, the company has a taxable profit. Corporation tax is due at the company. To get cash to you, you then pay a dividend or liquidate and distribute. That second step carries further personal tax.

By contrast, in a share sale at the same £2,000,000 price, you would typically face a single CGT charge on the £1,500,000 gain, potentially with BADR on the eligible portion. Even after warranties and a modest escrow, the net cash-to-hand is commonly higher and received sooner. This is why sellers usually prefer share deals and why structuring and preparing the company for a clean share sale is a focus of our Fit to Sell work.

Asset vs share sale: how buyers and sellers find middle ground

Buyers are often concerned about legacy risks in a share deal. You can bridge the gap without sacrificing tax efficiency.

• Vendor due diligence and disclosure. A robust vendor pack and well-run disclosure process reduces unknowns and shortens buyer diligence, supporting a share sale.
• Warranty and indemnity insurance. W&I can protect both parties and make a buyer comfortable acquiring shares while you retain the tax profile you want.
• Ring-fencing non-core items. Pre-sale hive-outs and simple internal reorganisations can remove property or legacy assets that complicate a share sale, provided they are done far enough in advance and managed for tax neutrality.

Checklist before you go to market

Ask yourself:

• Are we targeting an asset sale or share sale and have we modelled net cash to hand under both?
• Do I and any other key holders meet the BADR conditions and two-year tests?
• Is the company trading and clean of non-trading assets that would worry buyers?
• If a holdco is in place, would a sale qualify for SSE on a subsidiary disposal?
• Have we stress-tested earn-out or deferred consideration for tax timing?
• Are we sale-ready to hit a favourable tax-year date if buyer timetable allows?
• Have we aligned our legal drafting with the intended tax outcomes?
• Are there cross-border or residence issues for any party that we need to handle?

If any of these are a “maybe” rather than a “yes”, you will benefit from an early review.

FAQs

When do I owe CGT on the sale of my business?
When you make a disposal that creates a gain as an individual. For a share sale in a trading company, that is typically completion day. If you qualify for BADR, the reduced rate applies to eligible gains within your lifetime cap. HMRC’s BADR page sets out the current rates and dates. 

Can I defer tax on the sale of my business?
Sometimes. Share-for-share and qualifying loan-note consideration can defer CGT. Certain reinvestment and holdover reliefs may also apply in specific scenarios. The terms of the documents must match the relief you are relying on.

Is there a way to reduce the tax rate on selling a business?
Yes. BADR offers a reduced CGT rate on qualifying gains within a lifetime cap of £1 million per individual. The rate is 14% for disposals from 6 April 2025 to 5 April 2026 and rises to 18% from 6 April 2026. It was 10% for disposals on or before 5 April 2025. Plan well ahead to meet the conditions. 

Do broader CGT changes affect me even if I do not qualify for BADR?
Yes. Higher-rate CGT on chargeable assets was increased in late 2024, and planning around your personal income bands, allowances and timing still matters. Professional advice can help you avoid bracket creep and unnecessary accelerations of gain.

The Dexterity Partners Difference

Every business sale is a tax event. It does not have to be a tax shock. Dexterity Partners brings corporate finance and legal advice together from the first conversation through to completion. We design the route to market, align the documents with the tax model and project-manage closing, so you avoid late surprises and keep the value you have created.

If you are thinking about selling your UK company in the next three to five years, start with a confidential discussion about your options. Our Fit to Sell analysis will surface tax and structural issues early. Fit for the Future will make sure your legal and commercial foundations are ready for diligence. Together with 3Volution, we give buyers confidence and help you maximise after-tax proceeds.

Thinking about selling? Let’s map your exit and get the structure, timing and reliefs right from day one.