Capital Gains Tax When Selling a Business: How the Bill Is Worked Out and What the Seller Keeps
20 Oct 2026 · Unlocked · 15 min read
A founder who sells a limited company for £1,000,000 does not bank £1,000,000. After £30,000 of sale costs and capital gains tax at the 18% Business Asset Disposal Relief rate, the worked example further down leaves £795,958, and at the 24% higher rate the seller keeps £737,944 (GOV.UK, "Capital Gains Tax rates", checked 20 October 2026). Capital gains tax when selling a business is charged on the gain, so the base cost, the costs of the sale and the reliefs all move the final number. A seller who knows how to calculate capital gains tax on a share sale, which capital gains tax rate applies in 2026/27 and when the Self Assessment deadlines fall can estimate the net figure before agreeing a price.
What Is Capital Gains Tax on a Business?
What is capital gains tax on a business sale? It is the tax a shareholder pays on the profit made when they sell their shares, worked out as the sale price less what the shares cost and the allowable costs of buying and selling them (GOV.UK, "Tax when you sell shares: work out your gain", checked 20 October 2026).
An individual pays it only on total gains above the annual exempt amount, which is £3,000 for the 2026 to 2027 tax year (GOV.UK, "Capital Gains Tax allowances", checked 20 October 2026). A founder who subscribed £100 for their shares and sells them for £1,000,000 has a gain close to the whole price. A shareholder who bought in later at a higher price has a much smaller one, and the rate then applies to that smaller figure.
When Capital Gains Tax Applies to a Business Sale
Capital gains tax when selling a business applies to the shareholder personally when the shares change hands. The buyer acquires the company with its assets and its tax history, and the seller reports the gain on their own return. This article assumes a sale of shares throughout; selling the trade and assets instead changes who is taxed and how, which Share Sale or Asset Sale: Which Leaves the Seller Better Off? covers.
A gift of shares, or a sale to a family member at a reduced price, is still a disposal, and the gain is measured against market value in those cases (GOV.UK, "Capital Gains Tax: market value", checked 20 October 2026). Gifts to a spouse or civil partner are the main exception: GOV.UK states that Capital Gains Tax is not usually payable on them.
How to Calculate Capital Gains Tax on a Share Sale
How to calculate capital gains tax on a share sale comes down to four steps, using figures the seller already holds or will hold at completion:
- Start with the sale proceeds: the price agreed for the shares, or market value where the rules below require it.
- Deduct the base cost (what was paid for the shares) and the allowable costs of the sale.
- Deduct the £3,000 annual exempt amount for 2026 to 2027 (GOV.UK, "Capital Gains Tax allowances", checked 20 October 2026), along with any allowable losses.
- Apply the rate: 18% or 24%, or 18% on gains that qualify for Business Asset Disposal Relief (GOV.UK, "Capital Gains Tax rates", checked 20 October 2026).
The result is the tax due. Losses on other chargeable assets in the same tax year are deducted before the annual exempt amount, and unused losses from earlier years can be brought forward if they were reported to HMRC within four years of the end of the tax year of the loss (GOV.UK, "Capital Gains Tax: if you make a loss", checked 20 October 2026).
Valuing the Shares You Sold
For capital gains tax share valuation on an arm's length sale, the proceeds are the price per share agreed with the buyer, multiplied by the number sold. The base cost is what the seller paid for the shares, which for many founders is the nominal value subscribed when the company was formed, often £100 or less.
Shares bought at different times and prices in the same company follow special rules for working out their cost, as do shares received through an employee share scheme or after a merger or takeover (GOV.UK, "Tax when you sell shares: work out your gain", checked 20 October 2026). A shareholder who built up a holding in stages should have that cost worked out before agreeing a price.
Deducting the Costs of the Sale
Capital gains tax selling costs reduce the gain directly. HMRC's Capital Gains Manual limits allowable incidental costs to fees, commission or remuneration for the professional services of a surveyor, valuer, auctioneer, accountant, agent or legal adviser, costs of transfer, costs of advertising to find a buyer, and the cost of any valuation needed for the computation (HMRC CG15250, checked 20 October 2026). The cost must be incurred wholly and exclusively for the disposal.
Interest on a loan used to buy the asset is not deductible, and nor are costs the seller can claim as business expenses (GOV.UK, "Capital Gains Tax for business: work out your gain", checked 20 October 2026). Accountant's fees count only where they relate to establishing market value or an apportionment; fees for working out the tax itself are not allowable (HMRC CG15250, checked 20 October 2026).
When Market Value Replaces the Agreed Price
The market value capital gains tax rule replaces the agreed price with what the shares were worth. GOV.UK lists the situations: shares given away to someone other than a spouse, civil partner or charity, shares sold for less than they were worth, shares inherited where the Inheritance Tax value is not known, shares owned before April 1982, and shares acquired through certain employee share schemes (GOV.UK, "Tax when you sell shares: work out your gain", checked 20 October 2026).
The value is taken at the date of a gift or sale, and at 31 March 1982 for older holdings (GOV.UK, "Capital Gains Tax: market value", checked 20 October 2026). HMRC can check the valuation: after the disposal the seller can file a post-transaction valuation check form and should allow at least three months for a response (same GOV.UK page). A sale to an unconnected buyer at a negotiated price does not normally bring this rule into play.
CGT Rates on Share Sales in 2026/27
The capital gains tax rate on a share sale depends on the seller's income and on whether the gain qualifies for relief. From 6 April 2026 the rates are (GOV.UK, "Capital Gains Tax rates" and "Business Asset Disposal Relief", checked 20 October 2026):
| Seller's position | Rate on the gain |
|---|---|
| Gain falls within the basic rate band (£37,700 for 2026 to 2027) | 18% |
| Gain above the basic rate band, or a higher or additional rate taxpayer | 24% |
| Gain qualifies for Business Asset Disposal Relief | 18% |
The band test looks at income and gains together: GOV.UK's method is to take taxable income, add the taxable gain after the £3,000 allowance, and charge 18% on the part that sits inside the £37,700 band and 24% on the rest (GOV.UK, "Capital Gains Tax rates", checked 20 October 2026). On a gain of several hundred thousand pounds, almost all of it lands above the band.
The Business Asset Disposal Relief rate has risen in two steps: 10% on disposals on or before 5 April 2025, 14% between 6 April 2025 and 5 April 2026, and 18% from 6 April 2026 (GOV.UK, "Business Asset Disposal Relief", checked 20 October 2026), so a guide that still quotes 14% for 2026/27 predates the latest rise.
Reliefs That Reduce the Bill
Most routes to avoid capital gains tax when selling a business reduce or delay the bill rather than remove it. The main reliefs for a shareholder are these (GOV.UK, "Capital Gains Tax for business: tax relief", checked 20 October 2026):
- Business Asset Disposal Relief: 18% on qualifying gains from 6 April 2026, instead of 24%, for shareholders in a personal company who meet the conditions set out in Business Asset Disposal Relief Explained for Company Sellers.
- Gift Hold-Over Relief: where shares in an unlisted trading company or a personal company are given away, or sold for less than they are worth to help the buyer, the gain passes to the recipient, who pays when they sell; the claim is made jointly (GOV.UK, "Gift Hold-Over Relief", checked 20 October 2026).
- Business Asset Rollover Relief: delays the tax where proceeds are reinvested in new trading assets such as land, buildings or fixed plant within three years after the sale or one year before (GOV.UK, "Business Asset Rollover Relief", checked 20 October 2026). Shares are not among the asset types GOV.UK lists.
- Losses: allowable losses on other assets reduce the gain before the annual exempt amount is applied.
These are personal reliefs for the selling shareholder. The reliefs a company claims against its own Corporation Tax are a separate family, covered in A Map of the Tax Reliefs a UK Limited Company Can Claim.
Reporting Through Self Assessment
Capital gains tax self assessment is the standard route for a share sale: gains that are not from UK residential property can be reported in a Self Assessment tax return for the tax year after the disposal, and HMRC then tells the seller how much is owed and when to pay (GOV.UK, "Report and pay your Capital Gains Tax: if you have other capital gains to report", checked 20 October 2026).
A UK resident can instead use the "real time" Capital Gains Tax service for disposals in the 2025 to 2026 and 2026 to 2027 tax years. A seller already registered for Self Assessment who uses it must still include the sale in their return, and must attach a copy of the calculations when reporting (same GOV.UK page). Business Asset Disposal Relief is claimed in the additional information section of the Capital Gains summary pages of the return (GOV.UK, "Business Asset Disposal Relief", checked 20 October 2026).
When the Tax Is Due and How It Is Paid
When capital gains tax is due depends on the tax year of completion, which runs from 6 April to 5 April. For a sale completed in the 2026 to 2027 tax year, the dates are:
| Route | Report by | Pay by |
|---|---|---|
| Self Assessment, online return | 31 January 2028 | 31 January 2028 |
| Real time Capital Gains Tax service | 31 December 2027 | 31 January 2028 |
The Self Assessment dates follow GOV.UK's published pattern of an online return and payment by 31 January after the end of the tax year (GOV.UK, "Self Assessment tax returns: deadlines", checked 20 October 2026). The real time service dates follow GOV.UK's rule of reporting by 31 December in the tax year after the gain and paying by 31 January (GOV.UK, "Report and pay your Capital Gains Tax", checked 20 October 2026).
A completion in early April can move the bill a full year. A sale on 5 April 2027 falls in 2026 to 2027, while one on 6 April 2027 falls in 2027 to 2028, with payment due by 31 January 2029. Deferred and earn-out consideration follow different timing rules, set out in Tax on Earn-Out Payments From a Business Sale.
Worked Example: From Sale Proceeds to Net Proceeds
This example of capital gains tax calculation takes a founder selling 100% of a trading company for £1,000,000 in cash on completion, with a £100 base cost and £30,000 of legal and adviser fees (an illustrative assumption). The rates and allowance are from GOV.UK ("Capital Gains Tax rates" and "Capital Gains Tax allowances", checked 20 October 2026).
| Step | Calculation | Amount |
|---|---|---|
| Sale proceeds | Agreed price | £1,000,000 |
| Less base cost | Subscribed for the shares | £100 |
| Less sale costs | Legal and adviser fees | £30,000 |
| Gain | £1,000,000 − £100 − £30,000 | £969,900 |
| Less annual exempt amount | 2026 to 2027 | £3,000 |
| Taxable gain | £969,900 − £3,000 | £966,900 |
| Tax with Business Asset Disposal Relief | £966,900 × 18% | £174,042 |
| Tax at the higher rate | £966,900 × 24% | £232,056 |
With the relief, the seller keeps £1,000,000 less £30,000 of fees and £174,042 of tax, which is £795,958. Without it, and with income that already fills the basic rate band, the tax is £232,056 and the seller keeps £737,944. The gap between the two outcomes is £58,014.
The example assumes the whole price is paid in cash at completion. Loan notes, deferred payments and earn-outs change the timing and sometimes the rate, which How Deal Structure Changes the Tax You Pay on an Exit covers.
Frequently Asked Questions
Conclusion: What the Seller Keeps and Next Steps
The seller keeps the price less the fees and the tax at 18% or 24% on the taxable gain. Every line of that calculation starts from the price, so the next number to pin down is the business valuation to sell at.
Run the company through the business valuation calculator to get an indicative figure for the proceeds line, then read How to Value a UK Limited Company: The Main Methods to see how a buyer will test it. The calculator gives a planning estimate, not a market value HMRC would accept for the shares, and it does not establish how much capital gains tax is due.
