If you own a business and you're starting to think about selling it, the tax is likely to be one of your first questions. For most owners of a trading company, a sole trade or a partnership, the relief that matters most is Business Asset Disposal Relief. It can lower the Capital Gains Tax you pay when you sell the business or your shares in it, as long as you meet the conditions. It was called Entrepreneurs' Relief until April 2020.
This guide covers sales in the 2026 to 2027 tax year. It was updated after the Budget on 28 October 2026, which kept the 18% rate but cut the lifetime limit to £500,000 for disposals made on or after 6 April 2027.
What Business Asset Disposal Relief is
When you sell something for more than it cost you, the difference is a gain, and Capital Gains Tax is charged on it. Business Asset Disposal Relief lowers the rate on gains from selling all or part of a business, or shares in a company you own part of and work in. It applies to up to £1,000,000 of gains over your lifetime, falling to £500,000 for disposals made on or after 6 April 2027. HMRC calls a sale a disposal.
The Business Asset Disposal Relief rate for 2026 to 2027
For disposals on or after 6 April 2026, qualifying gains are taxed at 18%. The rate has gone up twice, from 10% to 14% on 6 April 2025 and to 18% on 6 April 2026. The Budget in November 2025 left the rate and the lifetime limit where they were. The Budget on 28 October 2026 kept the rate at 18% and cut the limit, as set out below.
| Date of disposal | Rate | Tax on £1,000,000 of qualifying gains |
|---|---|---|
| On or before 5 April 2025 | 10% | £100,000 |
| 6 April 2025 to 5 April 2026 | 14% | £140,000 |
| On or after 6 April 2026 | 18% | £180,000 |
The date that counts is the date of disposal, which isn't always the day the money arrives. For most sales it's the date an unconditional contract is made, which can be before completion. If the contract has a condition, such as a landlord's consent, it's the date the condition is met.
Capital Gains Tax on the sale of a business, for comparison
Without the relief, gains are taxed at the main Capital Gains Tax rates. For 2026 to 2027 those are 18% on gains within your basic rate band for Income Tax, and 24% above it. Everyone also has a tax-free allowance, the annual exempt amount, of £3,000.
So the relief rate is now the same as the basic rate, and six percentage points below the higher rate. For an owner whose gain would otherwise be taxed at 24%, the most the relief can save is £60,000, which is 6% of the £1,000,000 limit. From 6 April 2027, with the limit at £500,000, it's £30,000. That's still worth having, but it's a lot less than it used to be.
The lifetime limit
You can claim the relief on up to £1,000,000 of qualifying gains in your lifetime, for disposals on or after 11 March 2020. Before that date the limit was £10,000,000. Gains you've claimed it on before, including under its old name, count towards the limit, and gains above it are taxed at the main rates. There's no limit on how many times you claim, so a sale in stages can draw on the same limit until it runs out.
The Budget on 28 October 2026 cut the limit from £1,000,000 to £500,000 for disposals made on or after 6 April 2027. HMRC says special provisions will apply to contracts entered into before 6 April 2027 that haven't been completed by then, and to certain share reorganisations and exchanges of securities not completed by then. The Treasury estimates that three quarters of people who claim the relief have gains under £500,000. Our guide to what the Budget does to the tax on selling your business works out the difference for your own gain.
Who qualifies when you sell shares in a company
To qualify on a share sale, all of these must be true throughout the two years up to the date of the sale:
- It's your personal company. You hold at least 5% of the ordinary shares and at least 5% of the voting rights. You must also be entitled to at least 5% of the profits available for distribution and of the assets on a winding up, or to at least 5% of the proceeds if the whole company were sold.
- You work for it. You're an officer of the company, such as a registered director or company secretary, or an employee. A company in the same group counts too.
- It's a trading company. Its main activities are trading, or it's the holding company of a trading group.
The trading test can catch out a company with substantial non-trading activities, such as letting a property or holding investments. HMRC's manual says a case is unlikely to need a closer look where neither income nor assets suggest the non-trading side is above 20%, but that's a working guide rather than a legal limit. If that's you, ask your accountant to check well before a sale.
The two years catch people out too. Shares issued last year, or a director who stepped down a few months ago, can mean a holding that doesn't qualify yet, or no longer does.
Shares from an Enterprise Management Incentive (EMI) option have their own rules. They can qualify without the 5% test if you bought them after 5 April 2013 and the option was granted at least two years before the sale.
Selling a sole trade or a share in a partnership
If you're a sole trader or a partner, you sell the business itself, or all or part of your share of the partnership. To qualify, you must have owned the business, as a sole trader or a partner, for at least two years up to the date of the sale. The relief covers gains on the assets the business uses, such as goodwill and premises, but not assets held as investments. Selling one or two assets while the business carries on isn't necessarily a sale of part of the business. If you close the business instead, the same conditions apply, and you need to dispose of the assets within three years of closing.
Property or other assets you own personally
Many owners keep the premises in their own name and let the business use them. If you sell an asset like that as part of withdrawing from the business, alongside a qualifying sale of at least 5% of the company's shares or of a partnership, the gain can qualify too. HMRC calls this an associated disposal. Further conditions apply, and if the business paid you rent, the relief can be cut back.
Deferred consideration and earn-outs
Many sales don't pay the whole price on completion, and how the rest is paid changes the tax.
A fixed sum paid later
If part of the price is a fixed amount paid later, the full amount usually counts towards your gain at the time of the sale, so you can owe tax on money you haven't received. If the price is paid in instalments over more than 18 months, you can ask HMRC to let you pay the tax in instalments over up to eight years. If some of it is never paid, you can claim to have the gain adjusted.
An earn-out
An earn-out depends on how the business does after the sale, so nobody knows the amount on the day. The value of your right to those future payments is added to the price at the time of the sale, and the relief can apply to it then. When the payments arrive, any gain above that value is a gain on the right itself, and it doesn't qualify for Business Asset Disposal Relief. Different rules can apply if an earn-out is paid in shares or loan notes of the buyer.
Shares in the buyer
If part of the price is paid in shares in the buyer's company, there's usually no tax until you sell those new shares, and by then you may not qualify for the relief. You can elect to be taxed at the time of the exchange instead, so the gain can qualify. The election has to cover all the shares, and it has the same deadline as a claim.
How tax on selling a business depends on what you sell
In a share sale, you sell your shares and the company carries on underneath with its contracts, staff and history. You pay Capital Gains Tax on your gain, and Business Asset Disposal Relief can apply if you qualify.
In an asset sale, your company sells the business and its assets. The company usually pays Corporation Tax on its gains and the money stays in the company. You then pay tax again when you take it out, as salary or dividends, or when the company is wound up. Two layers of tax usually cost more than one.
Buyers sometimes prefer an asset sale because it leaves the company's history behind. If a buyer asks for one, work out what you'd keep after tax under each option before you compare offers. Our guide on how to sell a business covers the rest of the process.
A worked example with round numbers
This is an illustration using the 2026 to 2027 rates, not a calculation for your situation. Say you own all the shares in a trading company and have been its director for years. You've never claimed the relief, and your other income uses up your basic rate band. In June 2026 you sell all your shares for a gain, after costs, of £1,500,000, all paid on completion.
| Illustration | Amount |
|---|---|
| Your gain | £1,500,000 |
| First £1,000,000, taxed at 18% with the relief | £180,000 |
| Remaining £500,000, less the £3,000 annual exempt amount, so £497,000 taxed at 24% | £119,280 |
| Total Capital Gains Tax with the relief | £299,280 |
| The same gain with no relief, £1,497,000 taxed at 24% | £359,280 |
| Saved by the relief | £60,000 |
The same sale on or after 6 April 2027 would have only the first £500,000 taxed at 18%, which adds £30,000 to the tax and halves the saving to £30,000.
Now say your husband, wife or civil partner had owned half the shares and worked in the business as a director or employee, both for well over two years. You'd each have a gain of £750,000, inside each of your own limits. After the £3,000 allowance, each of you pays 18% on £747,000, which is £134,460. Together that's £268,920, or £30,360 less than if one of you had owned everything. On or after 6 April 2027, each £750,000 gain would be above the £500,000 limit, and together you'd pay £298,560, still £30,720 less than one owner.
The relief saves one person up to £60,000 at 2026 to 2027 rates
The relief saves you £60,000, the most it can save one person.
The relief rate has risen in two steps since April 2025
The higher rate of Capital Gains Tax is 24%, shown as the full height.
For your own figures, including what you paid for your shares and any of the lifetime limit you've already used, try our business sale tax calculator.
Legitimate ways to reduce tax when selling a business
Plenty of owners search for how to avoid tax when selling a business. What most want is to pay no more than they need to, which mostly comes down to planning early. We'd steer clear of anything sold as a scheme. These are the ordinary things to raise with your accountant.
Timing
Make sure every condition has been met for the full two years before the date of disposal, which is usually when the contract is made. If you plan to sell in stages, keeping a share and selling the rest later, each sale is tested on its own. If you hold less than 5% after the first sale, or stop being a director or employee, a later sale might not qualify.
Your spouse or civil partner
You can usually give or sell assets to your husband, wife or civil partner without Capital Gains Tax if you live together. They have their own lifetime limit and allowance, but only get the relief if they qualify in their own right, holding at least 5% and working in the business for the full two years before the sale. That needs deciding well ahead, and it has to suit your family and the business as well as the tax.
How the price is paid
Deferred payments, earn-outs and shares in the buyer each change the tax. They're usually set in heads of terms, so get advice before you agree those.
Pensions and charity
Pension contributions get tax relief up to annual limits, and some owners pay more in, personally or through the company, before a sale. If you plan to give some of the proceeds to charity anyway, ask whether giving shares before the sale would cost less tax, as assets given to a charity are free of Capital Gains Tax.
Selling to your team
A sale to an employee ownership trust has its own relief. For disposals on or after 26 November 2025, it covers half the gain rather than all of it, and Business Asset Disposal Relief can't be claimed on the same disposal.
How to claim Business Asset Disposal Relief
You claim the relief on your Self Assessment tax return for the tax year of the sale, or by filling in Section A of HMRC's helpsheet HS275. The deadline is the first anniversary of the 31 January after the end of that tax year. For a sale between 6 April 2026 and 5 April 2027, that's 31 January 2029. The tax itself may be due sooner, so ask your accountant when to pay.
Take advice before you agree terms
Everything here is general, and the relief has more conditions than we've covered. Small details, such as when shares were issued or what the company owns, can change the answer. Ask your accountant to check you qualify a year or two before you plan to sell, while there's time to put things right, and to work out what you'd keep after tax under each way of selling before you agree heads of terms. If they don't handle many business sales, ask them to bring in a tax adviser who does.
If you're still working out what the business might fetch, start with our guide to how to value a business, since the tax depends on the gain.