In short – yes, it’s likely you’ll need to pay tax if you sell your business. The amount of tax you might need to pay varies significantly depending on things like how the sale is structured, how much profit you’ve made, and whether you qualify for certain reliefs.

Understanding the basics ahead of time can help you plan smarter and potentially save a substantial amount, so we’ll explain the key considersations in this article.

Do you always pay tax when you sell your business?

In most instances yes, you will usually need to pay some form of tax but not necessarily on the full sale price or market value of your business. Tax is often charged on the profit or ‘gain’ you make, and there are also reliefs and allowances that can reduce your tax bill so you may pay less than you expect!

What taxes apply when selling your business in the UK?

There are several types of tax you should be aware of if you’re selling your UK business, including Capital Gains Tax, Income Tax, and Corporation Tax if you’re selling a limited company. We’ll explain how and why these might affect you in more detail below.

Capital Gains Tax (CGT) when you sell a business

Most business owners will pay Capital Gains Tax when they sell up. This type of tax applies to the profit you make when selling your business or shares in your company.

Income tax

There might be times when an amount is taxed as ‘income’ rather than ‘capital gains’ such as when a company is wound up and funds are distributed in a way that doesn’t qualify for Capital Gains Tax treatment.

Corporation Tax for limited companies

A limited company is separate to you as the owner, so the company will pay Corporation Tax on any profit it makes selling its assets.

It’s a bit different if you sell the shares you own in the company because you own these personally, so you’ll pay Capital Gains Tax on any ‘gain’ (the amount they increased in value).

How Capital Gains Tax works when selling a business

Selling a business (or your share of a business) and getting back more than you put in is classed as a ‘gain’, so you may need to pay Capital Gains Tax on the amount it increased in value.

To do this you need to work out your gain (the increase in value), deduct any allowances, and then check what rate of tax you need to pay. We have a step-by-step guide to working out Capital Gains Tax below, or you can use our free online calculator to estimate your CGT bill.
 

Can I claim any tax relief or allowances when I sell my business?

Yes! You may be able to qualify for Business Asset Disposal Relief (BADR). If you qualify, it can reduce the tax rate on eligible gains to 18% for disposals made on or after the 6th of April 2026.

To qualify for Business Asset Disposal Relief, you need to:

• Own at least 5% of the business
• Be an employee or director
• Have held the business (or shares) for at least 2 years before the sale

If you reinvest the proceeds into new qualifying business assets, you may be able to defer paying CGT until those assets are sold through Business Asset Rollover Relief.

Selling shares vs selling assets

It’s important to understand the difference between selling shares versus selling assets because of what this means for paying tax, and eligibility for reliefs and allowances.

Selling shares

Selling shares that you own is:

• Usually simpler from a tax perspective
• More likely to trigger Capital Gains Tax
• Potentially eligible for BADR

Selling assets

An asset sale involves selling individual parts of the business such as equipment, the brand, or inventory. It can be a bit more complicated because the way it’s taxed depends on who owns the asset.

• A sole trader isn’t legally separate from their business, so the sale of any assets will be taxed in the same way as it would be for an individual
• General partnerships don’t pay tax as an entity, so any ‘gain’ from selling assets will flow through to each partner to pay Capital Gains Tax on their own share
• Anything you get from selling a company asset belongs to the company. This means it will pay Corporation Tax on any gains, and then you’ll pay tax as an individual if you take that money out of the business for yourself

Tips to reduce tax when selling your business

It can be an overwhelming process, but planning ahead can minimise both tax and stress.

Think about the timing of the sale

Selling in a different tax year can affect how much tax you pay, especially if your income fluctuates. For example, if your regular earnings will be paused after selling the business, then you might want to wait for a new tax year to sell. That way, anything you get from the sale won’t get added to the other business income you got that year.

Structure your deal properly

The way your deal is structured matters. For example:

• Share sales are often more tax-efficient than asset sales
• Deferred payments may allow you to spread tax across a longer period of time (making use of the annual allowances)

Use reliefs and exemptions

Make full use of every relief available, especially BADR which can significantly reduce your tax bill.

Should I hire an accountant to help me sell my business?

It’s a big job, so likely yes! Because of how complex it is, seeking professional help is the best way to go about it. They can help you structure the deal efficiently; ensure you qualify for reliefs and minimise your overall tax burden.

 
Need help selling your business? Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, or get an instant online quote.