Last updated: 14 October 2026
Is the first £100,000 of a business sale tax-free?
No. There’s no £100,000 tax-free amount when you sell a business. Each individual has a capital gains tax annual exempt amount of just £3,000 for 2026/27. Above that, gains on selling a business or shares in a trading company are taxed at 18% or 24%, or at 18% if Business Asset Disposal Relief (BADR) applies on up to £1 million of lifetime gains. The idea of a £100,000 tax-free allowance may come from confusion with the old retirement relief, abolished in 2003.
CGT rates on business sales in 2026/27
| Relief or rate | Rate | Limit |
| Annual exempt amount | 0% | £3,000 |
| Business Asset Disposal Relief | 18% (from 6 April 2026) | £1 million lifetime |
| Investors’ Relief | 18% | £1 million lifetime |
| Basic rate CGT | 18% | Within unused basic rate band |
| Higher rate CGT | 24% | Above it |
Qualifying for BADR
- Sole traders and partners: selling all or part of the business, owned for 2 years
- Company shareholders: at least 5% of ordinary shares and votes, and either 5% of profits and assets on sale, and an officer or employee, for 2 years
- Trading company: not substantially investment activities (generally less than 20%)
Example
Helen sells her bakery business in 2026/27, making a £400,000 gain. She qualifies for BADR. After the £3,000 annual exempt amount, she pays 18% on £397,000, which is £71,460. Without BADR, as a higher rate taxpayer she’d pay 24%, which is £95,280. In 2024/25, BADR was 10%, so the same sale would have cost £39,700.
Other ways to reduce tax on a sale
- Transfer shares to a spouse before sale so both use their BADR limit and annual exemption
- Use an employee ownership trust: a sale of a controlling interest has qualified for CGT relief, but the relief has been restricted in recent Budgets, so check the current rules before relying on it
- Defer gains by reinvesting in EIS shares
- Roll over gains on business assets into new business assets
Paying the tax
CGT on a business sale is due by 31 January after the end of the tax year of sale. If you receive deferred consideration, you may be able to pay in instalments where the payments stretch over more than 18 months.
Earn-outs
If part of the price depends on future performance, the right to receive it is valued and taxed at the time of the sale, with a further gain or loss when the earn-out is paid. Elections may treat earn-out shares more favourably.
Common mistakes
- Assuming there’s a large tax-free allowance
- Missing the 2-year qualifying period for BADR
- Selling when the company holds too much cash or investments
- Not planning spouse transfers early enough
Records to keep
Keep the sale agreement, completion statements, original share certificates and evidence of base cost.
Frequently asked questions
Does BADR apply to goodwill?
Yes, for sole traders and partners.
Is the £1 million limit per person?
Yes, lifetime.
Can I sell to my company?
Possible, but anti-avoidance rules can tax the proceeds as income, so get clearance from HMRC first.
Do I pay NIC on the sale?
No.
Related: rolling over a property gain, whether to incorporate and the best business structure.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with selling your business. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
