Guide
Capital Gains Tax When Selling a Business 2026/27
Selling a business or your shares in a trading company can trigger a significant CGT liability — but Business Asset Disposal Relief (BADR) can reduce the rate to 14% on the first £1,000,000 of qualifying gains. This guide explains who qualifies, how the 2026/27 rates work and what to do when a gain exceeds the lifetime limit.
Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.
Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief — formerly known as Entrepreneurs' Relief until April 2020 — reduces CGT to a flat 14% on qualifying gains in 2026/27, compared to the standard higher rate of 24%. The relief has a lifetime cap of £1,000,000 of gains across all qualifying disposals in your lifetime.
The key qualifying conditions are:
- You must own at least 5% of the ordinary share capital of the company (and 5% of voting rights)
- The company must be a trading company (or the holding company of a trading group)
- You must have been an officer or employee of the company
- These conditions must have been met for at least 2 years ending on the date of disposal
The 2-year holding period was extended from 1 year to 2 years in April 2019. Claims are made on your Self Assessment return for the tax year of the disposal.
What BADR does NOT cover
BADR is only available on trading businesses. Several common situations fall outside its scope:
- Investment companies — companies whose main activity is holding investments rather than trading
- Property rental businesses — renting property is not treated as a trade for BADR purposes
- Shares sold where the 5% or 2-year condition is not met
- Gains exceeding the £1,000,000 lifetime limit — the excess is taxed at standard rates
Standard CGT rates on business asset gains
For business asset gains that do not qualify for BADR (or for the portion exceeding the £1,000,000 lifetime limit), the standard rates apply:
- 18% on gains falling within your remaining basic-rate band
- 24% on gains above the basic-rate band
- Annual exempt amount: £3,000 applies before any rate is applied
Investors' Relief
Investors' Relief is a separate CGT relief available to external investors (not employees or officers) who subscribe for new shares in an unlisted trading company and hold them for at least 3 years from April 2016. The relief applies a 14% rate on qualifying gains, with a separate lifetime limit of £1,000,000. It is distinct from BADR and the two limits are independent of each other.
What assets are included in a business sale?
A business sale can involve multiple asset types, each of which may have its own CGT calculation:
- Goodwill — intangible value above the net asset value of the business
- Shares in the trading company (share sale) or individual business assets (trade and asset sale)
- Commercial property — taxed as a non-residential property gain
- Plant and machinery — often taxed via the capital allowances balancing charge mechanism, not CGT
Worked example
Emma has owned 100% of a trading limited company as sole director for 8 years. She sells her shares for £1,400,000. Her original share subscription was £100. Her taxable income for the year is £80,000.
Sale proceeds£1,400,000
Minus original cost−£100
Gross gain£1,399,900
Minus annual exempt amount−£3,000
Taxable gain£1,396,900
First £1,000,000 at BADR rate (14%)£140,000
Remaining £396,900 at standard higher rate (24%)£95,256
Total CGT£235,256
Without BADR, the full gain at 24% would have been £335,256 — a saving of £100,000 from the relief.
Estimate your CGT on a business sale
Enter your proceeds and cost basis in the calculator to see a 2026/27 CGT estimate. For BADR calculations, apply 14% to the qualifying portion manually.
Open the CGT calculator
Official sources
Frequently asked questions
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR) is a CGT relief that reduces the rate charged on qualifying gains to 14% for 2026/27. It was previously called Entrepreneurs' Relief. It applies to gains made when disposing of a qualifying trading business or shares in a qualifying trading company, subject to a £1,000,000 lifetime limit.
Do I qualify for Business Asset Disposal Relief?
To qualify you must have owned at least 5% of the ordinary shares, held voting rights of at least 5%, and been an officer or employee of the company. All these conditions must have been met for at least 2 years ending on the disposal date. The company must also be a trading company (not mainly an investment or property rental business). You should take specialist tax advice before assuming you qualify.
What happens if my gain exceeds £1,000,000?
The first £1,000,000 of qualifying gains (across your lifetime) is eligible for BADR at 14%. Any gains above this lifetime limit are taxed at the standard CGT rates — 18% if they fall within your remaining basic-rate band, or 24% if they exceed it. You cannot apply BADR to gains already used against the lifetime allowance in previous years.
Does BADR apply to a sole trader selling their business?
Yes. BADR can apply to sole traders and partners selling their qualifying trading businesses or interests in a partnership, not just limited company shareholders. The same conditions around trading activity and ownership duration apply. For a sole trader, the business must have been owned for at least 2 years before disposal.
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.