UK Tax on Selling Business + Company Shares 2026/27
UK tax selling business 2026/27 - BADR 18% (up from 14% April 2026), Investors' Relief 14%, £1m lifetime cap, share sale vs asset sale, earn-out structures, warranty claw-back, MVL exit vs trade sale. Statute Section 169H-169W TCGA 1992 + Schedule 7ZA.
Selling a UK business or shares triggers Capital Gains Tax with BADR (18% from April 2026) + Investors' Relief (18% from April 2026, aligned with BADR) each up to £1m lifetime cap (IR cut from £10m at Autumn Budget 2024), SSE for corporate sellers, and structural considerations around share sale vs asset sale, earn-outs, warranties, and MVL liquidation. This guide covers each route + worked examples + 2-3 year pre-sale planning. Statute: Section 169H-169W + Schedule 7ZA TCGA 1992.
Key reliefs at a glance
| Relief | Rate | Cap | Hold period |
|---|---|---|---|
| BADR (post-Apr 2026) | 18% | £1m lifetime | 24 months |
| Investors' Relief (post-Apr 2026) | 18% | £1m lifetime | 3 years |
| SSE (corporate seller) | 0% | No cap | 12 months |
| Standard CGT | 18%/24% | n/a | n/a |
| Hold-over Relief (gift) | Deferred | n/a | n/a |
Frequently asked questions
What is BADR + how does it work?
Business Asset Disposal Relief (BADR): reduced CGT rate on qualifying business disposals. Rate 18% from 6 April 2026 (up from 14% in 2025/26 and 10% pre-April 2025). £1m lifetime limit: applies cumulatively across all disposals. Qualifying conditions Section 169H-169W TCGA 1992: (1) Personal company: 5%+ ordinary shares + 5%+ voting rights. (2) Officer / employee: director or full-time employee. (3) Trading company OR holding company of trading group: not investment vehicle. (4) Holding period 24 months minimum: extended from 12 months in April 2019. Worked example - £600k gain on company sale, BADR qualifying: CGT 18%: £108k. vs standard 24% CGT: £144k. Saving: £36k. Within £1m lifetime cap so full BADR applies.
BADR vs Investors' Relief - which applies?
Investors' Relief (IR): £1m lifetime cap (reduced from £10m at Autumn Budget 2024), 18% CGT rate from 6 April 2026 (up from 14% in 2025/26, was 10% pre-April 2025) - tracks BADR rate. Schedule 7ZA TCGA 1992. Conditions stricter than BADR: (1) Newly issued shares only: must be subscribed for, not purchased second-hand. (2) Held 3 years minimum. (3) Unlisted trading company. (4) NOT officer or employee at issue or during holding (key difference from BADR). (5) Issued on or after 17 March 2016. For directors / employees: use BADR. For external investors: use IR. Both reliefs share £1m lifetime cap but separately tracked: BADR £1m + IR £1m if applicable. 2026/27 strategic note: BADR + IR rates aligned at 18%, both capped at £1m lifetime - drastically reduced from pre-Budget-2024 generosity (BADR was 10% / IR was 10% with £10m cap).
Share sale vs asset sale - tax difference
Share sale: seller sells shares in company. Buyer acquires entire company including liabilities. Tax for seller: (a) CGT on gain (share value - base cost). (b) BADR / IR if qualifying. (c) Annual Exempt Amount £3,000. (d) Single transaction. Asset sale: company sells specific business assets (goodwill, equipment, premises, contracts). Company retains shell + cash from sale. Tax for company: (a) Corporation Tax on gain 19% / 25%. (b) No BADR at company level. (c) Substantial Shareholding Exemption (SSE) if conditions met: 10%+ shareholding + 12 months. Tax for shareholder extracting proceeds: (a) Dividend: dividend tax 10.75/35.75/39.35%. (b) MVL liquidation: capital treatment + BADR if qualifying. Typical preference: (1) Share sale preferred by seller: single tax + BADR. (2) Asset sale preferred by buyer: avoids historic liabilities + step-up basis on assets.
Earn-out structures - tax treatment
Earn-out: portion of sale price contingent on future performance. 2 main treatments: Treatment A - Marren v Ingles right (cash future payments): (a) Right to future cash treated as separate asset: valued at completion. (b) CGT on completion based on initial cash + market value of earn-out right. (c) Later cash receipts vs valuation difference: additional CGT or loss. (d) BADR potentially applies to initial portion only. Treatment B - Earn-out shares (deferred share consideration): (a) Section 138A TCGA 1992 election: defer CGT until earn-out shares received. (b) BADR potentially preserved on later vesting. (c) Risk: trading-status maintained throughout. Specialist tax advice essential: structure determines tens of thousands in tax difference. Worked example - £2m sale, £1m upfront + £1m earn-out 2 years: Marren v Ingles: CGT on £1m + £700k earn-out value at completion = £1.7m total CGT base. £300k of later cash if earn-out fully crystallises - separate CGT event. Section 138A: defer entirely until earn-out resolved.
Warranty claw-back + indemnity provisions
Warranty claim post-completion: buyer claims against seller for breach of warranties. Reduces sale proceeds retrospectively. Tax treatment: (a) Section 49 TCGA 1992: original CGT can be revised. (b) Refund claim from HMRC: if CGT overpaid. (c) Time limit 4 years after end of tax year of claim. Worked example - £2m share sale, £200k warranty claim 18 months later: Original CGT: £2m gain × 18% BADR = £360k. Revised gain: £1.8m × 18% = £324k. Refund: £36k. Documentation: (1) Signed warranty settlement agreement. (2) Bank record of repayment. (3) Tax computation showing original + revised. Indemnity payments: separate from warranty - treated similarly. Escrow arrangements: portion held back at completion. Tax treatment depends on whether seller is treated as having received it at completion (typical) or only on release.
Goodwill sale - personal goodwill issue
Goodwill sale - significant tax difference between corporate-held + personal goodwill. Corporate goodwill: (a) Sold by company: Corporation Tax on gain. (b) Goodwill amortisation rules (post-April 2002): generally allowable as deduction. (c) Substantial Shareholding Exemption: limited application to goodwill. Personal goodwill: (a) Goodwill attached to individual professional: e.g., GP, dentist, solicitor. (b) Owned personally (not via company): CGT on disposal. (c) BADR may apply if business sold as going concern. (d) Section 169L TCGA 1992: relief preserved if business genuine. HMRC scrutiny: artificial goodwill restructuring challenged. Genuine separation between corporate + personal goodwill required. Practical example - dental practice sale £1m: £400k attributable to practitioner personal goodwill: CGT on individual + BADR 18%. £600k corporate goodwill: company-level CT 25% + extraction tax. Personal goodwill route potentially saves tax: structure dependent on HMRC's view.
MVL Members' Voluntary Liquidation - capital extraction
MVL: solvent company winding up. Proceeds distributed to shareholders. Capital treatment (rather than dividend) - subject to CGT not income tax. Conditions: (1) Company solvent: declaration of solvency by directors. (2) All debts paid within 12 months. (3) Insolvency practitioner appointed: typical fee £3-£10k. (4) Section 84 + 89 Insolvency Act 1986. Tax treatment for shareholder: (a) Distribution treated as capital: CGT applies. (b) BADR if conditions met: 18% rate (vs higher dividend tax). (c) £1m lifetime cap. TAAR Targeted Anti-Avoidance Rule (April 2016+): prevents phoenix-trading (MVL then re-trade similar business). 2-year cooling-off period. If breach, distributions taxed as DIVIDEND not capital. Worked example - director MVL £400k retained profits: Capital treatment + BADR: £400k × 18% = £72k tax. vs dividend extraction at higher rate: £400k × 35.75% = £143k tax. MVL saves £71k. Plus pre-MVL pension contribution stack: further optimisation.
Pre-sale tax planning strategies
2-3 year pre-sale strategic checklist: (1) BADR qualifying period 24 months: start ownership clock if not yet qualifying. (2) Maximise pension contributions: 3 years £60k AA + carry-forward = up to £240k extracted tax-efficiently before sale. CT deduction. (3) Director salary structure: ensure £12,570 + dividend extraction maximised in years before sale. (4) Pre-sale dividend strip: extract retained profits as dividend (35.75% basic) before sale reduces sale price + CGT exposure. Trade-off: CGT cap vs dividend tax. (5) Spouse share transfer pre-sale: utilise spouse's £1m BADR + £1m IR cap + £3k AEA. (6) Family Trust pre-sale: complex but possible. (7) Holding company restructure: where appropriate. (8) Pre-sale due diligence by tax adviser: identify reliefs + risks. (9) Timing: cross tax year for AEA + lifetime cap utilisation. (10) Specialist solicitor + tax adviser: 6-12 months pre-completion. Worked example - 2-year planning, £2m sale: No planning: 1 person, BADR 18% × £1m cap = £180k + £1m at 24% = £240k. Total £420k. Spouse split + pension max: £1m each BADR = £360k total. £240k pre-sale pension £60k CT saved. Net saving ~£100k+.
Substantial Shareholding Exemption (SSE)
SSE: corporate seller exemption on share sale. Schedule 7AC TCGA 1992. For companies selling shares in other companies: Conditions: (1) Holding 10%+ ordinary shares. (2) Held continuously 12 months in 6 years preceding disposal. (3) Investing company is trading company / group. (4) Investee company is trading company / group. Result: (a) Gain exempt from Corporation Tax. (b) Loss not allowable. (c) Substantial tax saving on M&A. Worked example - holding co sells trading subsidiary £5m gain: Without SSE: 25% CT × £5m = £1.25m. With SSE: £0 CT. Plus liquidation of holding co: shareholders extract via MVL + BADR. Common SSE pitfalls: (1) Investee becoming non-trading near disposal: SSE lost. (2) Pre-sale restructuring breaking trading status. (3) Holding period <12 months: SSE lost. (4) Less than 10% shareholding: SSE lost (relaxation post-April 2017 for qualifying institutional investors only). (5) Group reorganisations pre-sale: complex SSE interactions.
Cross-border + non-UK buyers
UK shares sold to overseas buyer: UK tax position: (1) UK-resident seller: CGT applies as normal. BADR available if conditions met. (2) Non-resident seller: typically NO UK CGT on share sale (subject to specific exceptions for UK property-rich companies post-April 2019). NRCGT changes April 2019: (a) Disposal of "UK property rich" company shares: 75%+ value from UK land/property. CGT applies. (b) Indirect disposal regime: complex. (c) Other shares: non-residents typically outside UK CGT scope. Treaty considerations: (a) Most UK DTAs allocate share disposal taxing rights to seller's residence country. (b) Exceptions for land-rich companies. (c) Tax credit relief if double-taxed. Buyer-side stamp duty: (a) Stamp Duty 0.5% on UK share purchase. (b) Stamp Duty Reserve Tax 0.5% on electronic transfer. (c) Stamp Duty Land Tax (SDLT) on land-rich company purchase: 17%+ recently introduced. Withholding tax post-sale on dividends: (a) UK dividends to non-resident: 0% UK WHT (most cases). (b) Foreign owner of UK company: transfer pricing + thin capitalisation rules apply. Specialist international tax advice essential: cross-border M&A complex.
Family share transfers + capital tax
Family share transfers: various tax implications. Inter-spouse transfer: (a) No-gain no-loss: Section 58 TCGA 1992. (b) Base cost transfers. (c) No Inheritance Tax (IHT): spouse exemption. (d) Useful for BADR cap utilisation. Inter-generational transfer (parent to child): (a) CGT applies: gift treated as disposal at market value. (b) Hold-over Relief Section 165 TCGA 1992: defer gain if gift of business asset. Recipient takes over base cost. (c) IHT 7-year Potentially Exempt Transfer (PET): gift outside estate if donor survives 7 years. (d) Stamp duty: 0.5% on UK shares (paid by recipient). Hold-over Relief conditions: (1) Gift (or sale at undervalue). (2) UK trading company. (3) Personal company (5%+) OR working in trade. (4) Joint election by both parties. Worked example - parent gifts £500k of personal-company shares to adult child: Without hold-over: parent CGT on £500k gain × BADR/standard. £90k-£120k tax. With hold-over: tax deferred. Child takes parent's original base cost. CGT crystallises only on child's eventual disposal. IHT 7-year PET: parent must survive 7 years for full IHT-free transfer. Specialist advice: family + business succession planning requires solicitor + tax adviser.
Strategic checklist - selling your business
End-to-end business sale checklist: 2-3 YEARS BEFORE: (1) Establish BADR qualifying period: 24 months minimum. (2) Tax adviser engagement: planning consultation £2-5k typically. (3) Specialist M&A solicitor consultation: scope of preparation. (4) Maximise pension contributions: £60k AA + carry-forward. (5) Spouse involvement planning: share ownership for cap utilisation. (6) Holding company restructure consideration. 1-2 YEARS BEFORE: (7) Business optimisation: maximise EBITDA + clean accounts. (8) Valuation expert engagement. (9) Information memorandum preparation. (10) Buyer identification + approach. (11) Vendor due diligence: identify issues early. (12) Tax-loss utilisation: crystallise losses against gains. (13) Pre-sale dividend stripping consideration. (14) Trust + family planning. SALE PROCESS: (15) Heads of Terms negotiation. (16) Buyer due diligence cooperation. (17) Sale + Purchase Agreement. (18) Warranties + indemnities negotiation. (19) Tax warranties + tax indemnity. (20) Completion + funds receipt. POST-COMPLETION: (21) CGT return filed within 60 days for property; SA for shares. (22) Payment 31 January following year. (23) Earn-out tracking + tax revision. (24) Warranty claim management. (25) Investment of proceeds: Individual Savings Account (ISA) + pension + GIA strategy. (26) IHT estate planning: post-sale wealth significantly larger. (27) Update will + LPA. (28) Charitable giving consideration. (29) Annual review with adviser. Lifetime tax saved via good planning: typically 10-20% of sale value vs no planning.