Capital Gains Tax When Selling a Business 2026/27

Sell your business or your shares in a trading company and the profit is a capital gain, not income. The headline is Business Asset Disposal Relief: if you qualify, it caps the rate at 18%¹ on the first £1,000,000 of qualifying gains you make across your whole life. Above that, or if you don't qualify, you're on the standard 18%/24% rates. Here's who gets the relief, how the sum works, and the conditions that quietly disqualify people.

Business Asset Disposal Relief (BADR)

BADR - called Entrepreneurs' Relief until April 2020 - cuts the CGT rate on qualifying business gains to a flat 18% in 2026/27, whatever your income.¹ That compares with the standard 24% higher rate, so the relief is worth up to £60,000 on a £1m gain. The £1,000,000 cap is a lifetime figure across every qualifying disposal you ever make, so a serial founder can only shelter £1m in total, not £1m per company.

The rate has climbed fast: 10% up to 5 April 2025, 14% for 2025/26, then 18% from 6 April 2026. It's the date of disposal that fixes which rate you pay, and for CGT that is normally the date contracts are exchanged (or a conditional contract becomes unconditional), not completion. So a deal exchanging in March 2026 but completing in April 2026 is taxed at 14%.

Who qualifies for BADR

There are two main routes in, and both look back over a full two years ending on the day you sell.¹

Selling shares in your personal company. Throughout the two years before the sale you must have:

• held at least 5% of the ordinary share capital and 5% of the voting rights;
• been an officer (director) or employee of the company; and
• owned shares in a trading company (or the holding company of a trading group) - not an investment or property-letting business.

Selling a sole trade or partnership. A sole trader or partner can claim BADR when disposing of all or part of a business they've owned for at least 2 years, including the assets used in it. Selling individual assets while you carry on trading doesn't count - it has to be a disposal of the business itself, or of assets after you've stopped trading.

The two-year clock is unforgiving. Become a director 18 months before the sale, or set the company up and sell inside two years, and there's no relief - even if the business is a runaway success.

What BADR does not cover

The relief is for trading businesses only. These fall outside it:

• Investment companies whose main activity is holding investments rather than trading;
• Property rental businesses - letting is not a trade for BADR;
• Shares where the 5% or two-year test isn't met; and
• The slice of any gain above the £1,000,000 lifetime limit, which reverts to standard rates.²

Standard rates above the limit

Where a gain doesn't qualify, or sits above the £1m cap, the ordinary CGT rules take over:²

• 18% on any gain that falls inside your remaining basic-rate band;
• 24% on gains above it; and
• the £3,000 annual exempt amount comes off first.³

Investors' Relief

Investors' Relief is a separate scheme for outside investors - not officers or employees - who subscribe for new shares in an unlisted trading company and hold them for at least three years. It also gives an 18% rate, with its own £1,000,000 lifetime limit that runs independently of your BADR limit.

Worked example - a business sale over the £1m limit

Emma has run a trading limited company as sole director for eight years and owns 100% of it. She sells her shares for £1,400,000; her original subscription cost was £100 and her other income for the year is £80,000, so she's a higher-rate taxpayer. She has never used any of her BADR allowance.

Without BADR the whole £1,396,900 would be taxed at 24% - £335,256. The relief on the first £1m (24% down to 18%) saves Emma exactly £60,000.

How to claim and report

BADR isn't given automatically - you have to claim it.³

1. Work out the gain on the disposal and check the two-year conditions were met to the day of sale.
2. Report the disposal on the Capital Gains pages (SA108) of your Self Assessment return and tick the BADR claim.
3. The deadline is the first anniversary of the 31 January following the tax year of the disposal - so a 2026/27 sale must be claimed by 31 January 2029.
4. Pay the CGT by 31 January after the tax year (share and business-asset gains go through Self Assessment, not the 60-day property service).

Where business sellers trip up

• A cash-rich company failing the trading test. Years of retained profit sitting as surplus cash, or an investment property on the books, can tip the company over into "investment" and cost you BADR. Take advice on a pre-sale dividend if you're borderline.
• Dilution below 5%. A funding round that issues new shares can drop you under 5% and end your eligibility overnight. There's an election to bank the gain at market value before the dilution - use it before, not after.
• Missing the two-year mark by weeks. The clock runs to the date of disposal, which is normally exchange of contracts, not completion. Delaying a sale a month can be worth tens of thousands.
• Assuming the £1m is per company. It's a single lifetime pot. If you've claimed before, only the unused balance is left.

Frequently asked questions

This page is for general information only and is not financial, tax or legal advice. BADR and business CGT rules are complex. Consult a qualified tax adviser or accountant before completing a business disposal.