How Is Selling a Business Taxed in the UK? A 2026 Guide
Selling a UK business is taxed as a capital gain at 18% or 24%, or 18% on up to £1m with BADR. As at August 2026, a share sale is almost always more tax-efficient than an asset sale.
Short answer: Selling a UK business is taxed as a capital gain in the hands of the seller — at 18% or 24% (the CGT rates), or 18% on up to £1 million of qualifying gains if Business Asset Disposal Relief (BADR) applies. As at 9 August 2026, a share sale by an individual is almost always more tax-efficient than an asset sale, because an asset sale triggers corporation tax in the company plus a second charge on extraction.
Share sale vs asset sale
The key decision is what is being sold:
- Share sale — the buyer buys the company's shares from the shareholder. The individual seller pays CGT on the gain, potentially at the BADR rate of 18%.
- Asset sale — the company sells its trade and assets, pays corporation tax (25%) on any gain, then distributes the cash to the seller. The seller then pays a second layer of tax — typically dividend tax (up to 39.35%) or CGT on a liquidation.
For individual sellers, a share sale is usually far more tax-efficient — it avoids the double charge and accesses BADR.
The BADR rate in 2026-27
BADR applies a 18% rate to the first £1 million of qualifying lifetime gains. The rate increased from 10% to 14% (2025-26) to 18% (2026-27 onwards). The lifetime limit is £1 million, so BADR now saves a higher-rate taxpayer a maximum of £60,000 (6% of £1 million).
Who qualifies for BADR on a share sale?
You generally need, for at least two years before disposal:
- to be an officer or employee of the company, and
- to hold at least 5% of the ordinary share capital and 5% of voting rights.
The company must be a trading company (or holding company of a trading group).
EMI: the one-year route
If you hold shares acquired through an EMI option exercised at least one year before sale, the two-year qualifying period drops to one year — a powerful planning tool for management selling alongside founders.
Earn-outs
Where part of the price is deferred and contingent, the seller can elect to be taxed either on the value of the earn-out right at completion (at the BADR rate, if applicable) or when the consideration is actually received. The election must be made within strict deadlines and materially affects the tax outcome.
Practical example
A founder sells her trading company shares for £3 million with a £2.999m gain in 2026-27, qualifying for BADR:
- £3,000 annual exemption (0%)
- £1,000,000 at 18% (BADR) = £180,000
- £1,996,900 at 24% = £479,256
- Total CGT: approximately £659,256
Had the sale been structured as an asset sale — corporation tax at 25% plus a further charge on extracting the surplus — the combined effective rate could exceed 35%, adding over £200,000 to the bill.
Legislation
BADR is at TCGA 1992, s169I–s169R. The staged rate increases were announced at the October 2024 Budget. EMI treatment is at s169IA. Earn-out treatment is at s279A–s279D TCGA 1992. The Substantial Shareholding Exemption (for corporate sellers) is at sCH1A TCGA 1992.
How Newshams can help
Newshams Tax Advisers advises business owners on every stage of an exit — BADR qualification, EMI planning, share-vs-asset structuring and earn-out elections. Contact us on +44 (0) 800 211 8657 or enquiries@newshams.com.
Frequently Asked Questions
What is corporate tax restructuring?+
Corporate tax restructuring involves reorganising a company's group structure to achieve tax efficiency, which can include mergers, demergers, share-for-share exchanges, and asset transfers. Specialist advice is essential to ensure compliance and maximise available reliefs.
Do I need HMRC clearance for a corporate transaction?+
Many corporate restructurings require statutory clearance from HMRC to confirm that reliefs such as substantial shareholding exemption or share-for-share exchange relief apply. A Chartered Tax Adviser can prepare and submit the clearance application.
How can a Chartered Tax Adviser help with a business sale?+
A Chartered Tax Adviser can structure the sale to minimise tax liability, identify available reliefs, prepare HMRC clearances, and ensure compliance with all tax obligations throughout the transaction.
Simon Newsham CTA
Chartered Tax Adviser — Founder, Newshams Tax Advisers
Simon Newsham is a Chartered Tax Adviser (CTA) with over 30 years' experience advising businesses, high net worth individuals, law firms and accountancy practices on complex UK tax matters. He has been advising clients since 1995 and is a member of the Chartered Institute of Taxation.
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