Capital Gains Tax on a business sale is charged on your profit, not the sale price. In 2026 the standard rates are 18% within your basic-rate band and 24% above it, but Business Asset Disposal Relief can reduce the rate to 18% on your first £1m of qualifying gains, after a £3,000 annual exemption.
The short answer
- CGT is charged on your gain (proceeds less cost), not on the full sale price.
- In 2026 the standard rates are 18% within the basic-rate band and 24% above it.
- BADR reduces the rate to 18% on the first £1m of qualifying lifetime gains.
Capital Gains Tax (CGT) is the main tax you pay when you sell a business at a profit, and the key thing to grasp is that it is charged on the gain, not the sale price. If you sell for £800,000 and your original investment plus costs was £200,000, your gain is £600,000, and it is that figure, less your annual exemption, that is taxed. This is general information, not personal advice.
How much you actually pay then depends on three things: your other income in the year, whether Business Asset Disposal Relief applies, and how much of your £1m lifetime relief limit remains. Together these can move the effective rate anywhere from 18% up to 24%.
The 2026 rates
Capital Gains Tax on a business sale (from 6 April 2026)
| Situation | CGT rate | Notes |
|---|---|---|
| Qualifying gains under BADR | 18% | First £1m of qualifying lifetime gains. |
| Gains within your basic-rate band | 18% | Only the part of the gain that fits your unused basic-rate band. |
| Gains above the basic-rate band | 24% | The default higher rate for most business owners. |
| Annual exempt amount | 0% | First £3,000 of total gains each year is tax-free. |
Because the gain is stacked on top of your income, most owners selling a sizeable business will pay the 24% rate on any gains above their BADR allowance, since a large gain quickly uses up the basic-rate band. Only a modest slice may fall in the 18% band. That is why securing BADR on the first £1m matters so much: it is the difference between 18% and 24% on that tranche.
It helps to separate CGT from the other taxes that can crop up around a sale. Corporation tax may fall due inside the company if it, rather than you, sells its assets; income tax and dividend tax apply to money extracted as salary or dividends rather than as sale proceeds; and stamp duty is generally the buyer’s concern, not the seller’s. For a straightforward sale of your shares, though, CGT is the tax that matters, and the whole planning exercise is really about keeping as much of the gain as possible inside the lower-taxed capital regime rather than letting it leak out as higher-taxed income.
A worked example
Suppose you sell your qualifying trading company for a £1.2m gain, having used none of your BADR limit and with income already above the basic-rate threshold:
- First, deduct the £3,000 annual exemption, leaving a taxable gain of £1,197,000.
- The first £1m qualifies for BADR at 18%, roughly £180,000 of tax.
- The remaining £197,000 is taxed at 24%, around £47,000.
- Total CGT is approximately £227,000, an effective rate of about 19% on the gain.
Without BADR, the same gain taxed wholly at 24% would cost around £287,000, so the relief is worth roughly £60,000 here. The example also shows why splitting qualifying shares with a spouse, each with their own £1m limit and £3,000 exemption, can save tens of thousands more.
Set the tax aside on completion
Because CGT on a business sale is usually paid via Self Assessment months later, it is easy to spend proceeds you will owe to HMRC. Ring-fence the estimated tax immediately, ideally after a professional has calculated it, so the bill in January holds no surprises.
Reducing the bill legitimately
There are several honest levers, most of which need to be pulled before completion: qualifying for BADR, using both spouses’ allowances, timing disposals across tax years to use two annual exemptions, offsetting capital losses, and making pension contributions in the surrounding years. Our guide to selling a business tax-efficiently and the wider financial planning guide to selling set these out in detail.
The interaction with your other income in the year is easy to underestimate. Because a capital gain sits on top of your income when deciding how much falls in the basic-rate band, taking a large dividend or bonus in the same tax year as a sale can push more of the gain into the 24% band. Sometimes simply deferring income, or completing a sale early in a new tax year, changes the effective rate. These are the fine judgements that make timing such a powerful, and underused, planning tool.
Reliefs beyond BADR occasionally come into play as well. Investors’ Relief can apply to certain external shareholdings, gift holdover relief may defer a gain where you pass shares to family rather than sell, and rollover relief can defer tax where proceeds are reinvested in new qualifying business assets. None is a substitute for BADR on a clean exit, but for owners with more complex plans, a phased handover, a family succession, or a reinvestment into a new venture: they can materially change the bill.
After the sale, the focus shifts to investing the proceeds and managing tax on a larger estate, a natural point to think about personal tax planning as a whole. The free Vetted Wealth service matches you with an independently vetted, FCA-regulated adviser through business exit and succession planning. This is information and a matching service, not personal advice; tax depends on your circumstances and can change, and investments can fall as well as rise.
In summary
- CGT is charged on your gain (proceeds less cost), not on the full sale price.
- In 2026 the standard rates are 18% within the basic-rate band and 24% above it.
- BADR reduces the rate to 18% on the first £1m of qualifying lifetime gains.
- A £3,000 annual exemption comes off the gain before tax is charged.
- Most large business gains are taxed largely at 24% once the BADR limit is used.
- The tax is usually paid via Self Assessment, ring-fence it; this is information, not personal advice.
Sources and further reading
Read the full guide
For the complete picture, see our in-depth guide: Selling a Business Tax-Efficiently.
Speak to a vetted business exit & succession planning specialist
This is free information, not personal advice. When you’re ready, we’ll match you with an independently vetted, FCA-regulated specialist, free, and with no obligation.
