Selling a Company in the UK: Capital Gains Tax and Reliefs
Owner-managed business directors planning an exit, shareholders considering a partial sale, and tax advisors involved in transaction structuring.
How Capital Gains Tax (CGT) applies when selling a business, the difference between share sales and asset sales, and the availability and conditions of Business Asset Disposal Relief (BADR).
The structure of a transaction directly affects the tax outcome. Poor structuring or missed relief conditions can lead to significantly higher CGT liabilities or loss of BADR eligibility. Early planning protects value and reduces risk.
How CGT Applies When Selling a Business
When you sell all or part of your company, the disposal will usually give rise to a capital gain. The gain is generally calculated by:
- Sale proceeds received for the shares or assets
- Less the base cost of those shares or assets
- Less any allowable disposal costs
The resulting gain is subject to Capital Gains Tax, potentially reduced by available reliefs, including Business Asset Disposal Relief where conditions are met.
What You Must Do Before Completing a Business Sale
If you are selling your company, there are important actions you must take to properly finalise your affairs. Please note that this is not an exhaustive list, and it is important to check what else may be required.
We have summarised below some of the main steps you need to take if closing your business:
- Your responsibilities when selling a limited company will depend on whether you’re selling your entire shareholding, or the company is selling part of its business.
- Keep staff informed about redundancy terms or relocation packages and be mindful not to breach your employees’ rights.
- If you are selling your entire shareholding, you should appoint new directors before you resign as a director yourself.
- Consider your liability to Capital Gains Tax and whether you can benefit from reliefs including Business Asset Disposal Relief, previously known as Entrepreneurs’ Relief.
- If there are charges against your company, for example a mortgage on your house to secure a business loan, you must let the provider know within 21 days of the sale.
- You may want to transfer your VAT registration to the new owner.
Share Sale vs Asset Sale
The tax outcome can differ significantly depending on whether the transaction is structured as a share sale or an asset sale.
Share Sale
- The buyer acquires shares in the company.
- The shareholder is taxed personally on the capital gain.
- Business Asset Disposal Relief may be available if qualifying conditions are satisfied.
Asset Sale
- The company sells its business assets.
- The company may pay Corporation Tax on gains.
- Further personal tax may arise if proceeds are extracted.
Commercial negotiations often focus on price, but structure can materially change the net outcome after tax.
Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief can reduce the rate of CGT on qualifying disposals, subject to specific conditions relating to:
- Shareholding requirements
- Employment or officer status
- The company being a trading company
- The qualifying period prior to disposal
If these conditions are not met, the gain may be taxed at standard CGT rates.
Risks of Poor Structuring or Missed Reliefs
Exit transactions involve commercial, legal, and tax considerations. If tax is not reviewed early, risks include:
- Higher CGT liabilities than anticipated
- Loss of BADR eligibility
- Unexpected personal tax exposure following an asset sale
Once heads of terms are agreed, flexibility to optimise tax treatment may be limited.
Real-World Scenarios
- Full company exit: Selling 100% of shares as part of retirement or succession planning.
- Partial share disposal: Selling a minority stake while retaining involvement.
- Asset vs share sale negotiation: Balancing buyer preference with seller tax efficiency.
Each scenario carries different tax consequences and should be reviewed before finalising agreements.
Planning Before Heads of Terms
Tax efficiency is most effectively addressed before agreements are finalised. Reviewing eligibility for reliefs and confirming the most appropriate structure early can materially improve the after-tax outcome.
Selling Without Proper Structuring Can Be Costly
Selling all or part of your company is a major financial decision, and without careful planning the Capital Gains Tax impact can significantly reduce the value you retain. Cigma Accounting supports business owners across London in structuring share sales and business disposals efficiently, ensuring compliance while protecting value with guidance from an experienced tax accountant in London.
From our Kingston Upon Thames, supporting clients in Chessington and Hook , we integrate disposal planning into your wider exit and succession strategy rather than treating tax as an afterthought. With physical offices across London, our team provides strategic and dependable support through trusted accounting services London expertise to help you complete your transaction with clarity and confidence.
PLANNING TO SELL YOUR BUSINESS OR A SHAREHOLDING?
Disposals can trigger significant tax consequences, from Capital Gains Tax to potential reliefs that must be structured correctly. Early, specialist advice can help you protect value, structure the deal efficiently, and avoid costly surprises after completion.
Trusted guidance from London-based accountants, focused on accuracy, clarity, and compliance.
