Company share buyback calculator

When a company buys back its own shares, HMRC's starting point is that anything it pays above the capital originally subscribed for the shares is a distribution, taxed like a dividend. The part up to what was subscribed is treated as a sale of the shares for Capital Gains Tax.

The whole payment is taxed as a capital gain instead if the buyback meets the conditions in sections 1033 to 1043 of the Corporation Tax Act 2010. In outline:

• The company is an unquoted trading company, or the unquoted holding company of a trading group.
• The purpose is wholly or mainly to benefit the trade, and not to avoid tax.
• The seller is UK resident in the tax year of the buyback and has owned the shares for five years, or three if they were inherited.
• The seller's interest falls substantially. Afterwards their share of the company is no more than 75% of what it was, and they hold no more than 30%, counting a husband, wife or civil partner they live with and children under 18.

Before paying, the company can ask HMRC for advance clearance that capital treatment applies. It isn't compulsory, and HMRC has to reply within 30 days of the application, or of any further information it asks for.

1. Capital treatment. The gain is the price less what you paid for the shares. It's taxed the same way as our business sale tax calculator: the £3,000 allowance first, then 18% with Business Asset Disposal Relief up to what's left of the £1,000,000 lifetime limit, and otherwise 18% in the basic rate band and 24% above it.
2. Income treatment. The price less what you originally paid is added to your other income as a dividend. Your other income uses your Personal Allowance and the bands first, and the dividend sits on top.
3. The dividend allowance. The first £500 of dividends is taxed at 0%, but it still uses up the band it falls in.
4. The dividend rates. 10.75% inside the basic rate band, 35.75% up to £125,140, and 39.35% above it. With other income of £50,270 or more, none of the dividend falls in the basic rate band.
5. The Personal Allowance. A dividend counts as income, so a large one can take your total above £100,000, where the £12,570 allowance goes down by £1 for every £2. The calculator adds the extra tax that causes on your other income. A capital gain doesn't count as income, so it doesn't affect the allowance.

Take the made-up example in our guide. A company buys back shares its retiring director paid £1,000 for, at £400,000, and her other income is £130,000. Taxed as a capital gain with the relief, the tax is £71,280. Without the relief it's £95,040. Taxed as a dividend, it's £156,810, so capital treatment leaves her £85,530 better off.

Checked on GOV.UK on 28 October 2026, after the Budget, which didn't change them for 2026 to 2027. The lifetime limit falls to £500,000 for disposals from 6 April 2027.

The Budget announced that the rules on how payments from a company to its shareholders are taxed will be modernised from April 2028. That includes the relief that lets a buyback count as a capital gain. HMRC's factsheet says the aim is to tax similar transactions the same way, to stop arrangements such as a new holding company being used to take profits out as capital, and to support genuine exits and family successions, including company-funded exits done in stages.

Draft rules are due for consultation in 2027. Until April 2028, the test for which treatment applies stays as described here. Separately, the Business Asset Disposal Relief lifetime limit falls from £1,000,000 to £500,000 for disposals from 6 April 2027, which changes the with-relief figure for larger buybacks after that date.

• Whether the conditions are met. The calculator shows both treatments because it can't tell which applies. That depends on the company, the seller and the reason for the buyback.
• Shares bought from another shareholder. If you paid more for your shares than was originally subscribed for them, income treatment can leave a capital loss as well as a dividend. The calculator assumes the shares were issued to you.
• Buybacks in stages. The 75% and 30% tests apply after each purchase, and each stage may fall in a different tax year.
• Your other income in detail. It's all treated as salary or similar income. Savings interest, other dividends and pension contributions can change the figure, and Scottish Income Tax rates are different, though dividend rates are the same across the UK.
• The company's side. The company pays Stamp Duty of 0.5% on a price over £1,000, and it can only pay out of distributable profits, or capital in limited cases.
• Losses and other gains in the same tax year, which can change the Capital Gains Tax.