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 18% 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 Entrepreneurs' Relief until April 2020 — reduces CGT to a flat 18% on qualifying gains in 2026/27, compared to the standard higher rate of 24%. The lifetime cap is £1,000,000 across all qualifying disposals.

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 in April 2019. You claim BADR on your Self Assessment return for the tax year of the disposal.

What BADR does NOT cover

BADR only applies to 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

Where gains do not qualify for BADR, or for the portion above 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 for 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. It applies an 18% rate on qualifying gains, with a separate lifetime limit of £1,000,000. It is distinct from BADR and the two limits are independent.

What assets are included in a business sale?

A business sale can involve several asset types, each with 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 subscription cost 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 (18%)£180,000 Remaining £396,900 at standard higher rate (24%)£95,256 Total CGT£275,256

Without BADR, the full gain at 24% would have been £335,256. The relief saves her £60,000.

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 18% 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 18% for disposals in 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 18% (from 6 April 2026). 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.