Blog
November 3, 2026
By Adam Caplan, Partner
It is easy for business owners to become preoccupied with the headline price of their business, failing to consider the final share they will keep.
In the majority of cases, you will need to pay some form of tax on a sale, although the overall liability is decided by a confluence of factors.
Capital Gains Tax (CGT) is the most common tax impacting a business sale, which applies to profit made from disposing of business shares or assets.
Understanding the tax considerations can help you plan your exit and minimise tax liabilities, with how much you pay often decided by decisions made long before a sale is finalised.
CGT is taxed on the profit made when a business is sold. In practice, this applies to disposals of business assets and shares, with rates varying based on income tax bands and eligibility for specific reliefs.
For 2026/27, CGT is charged at 18 per cent for the basic rate and 24 per cent for anything above, after deducting the individual £3,000 exemption.
You can deduct specific costs from total profit, lowering the total CGT bill. Sellers often underestimate the deductible costs available, with the following frequently overlooked:
In addition, the way a sale is structured can also have implications on the overall tax liability.
For example, whether a transaction involves the sale of assets or the sale of shares can substantially affect how gains are taxed and the reliefs available.
Asset sales involve a company selling individual assets and rights, resulting in Corporation Tax on the gain and additional tax liabilities when the money is extracted.
By contrast, share disposals only receive one layer of CGT on the growth of shares, without the extra Corporation Tax liability.
Buyers often prefer asset purchases, while sellers often prefer share sales, leading to negotiations often fraught with competing tax interests.
What was once known as Entrepreneur’s Relief, Business Asset Disposal Relief (BADR) can reduce the chargeable CGT when selling qualifying assets or shares.
The rate of CGT payable under BADR has increased from 10 per cent to 14 per cent from April 2025 and to 18 per cent from April 2026.
Gains above the lifetime cumulative limit of £1 million are taxed at the standard CGT rate, which is currently 24 per cent for higher- and additional-rate taxpayers.
The lifetime limit of BADR was lowered from £10 million to £1 million in 2020 and will be reduced to £500,000 for disposals made after 6 April 2027.
With the lifetime limit due to halve from April 2027, some business owners may consider a sale before the reduced relief arrives, though this should form part of a careful exit plan review.
To qualify for BADR, all the following must apply for at least two years up to the date you sell your business:
Elsewhere, the Government has proposed a Founders’ Relief from April 2027, applying a CGT break of 10 per cent for qualifying share disposals up to a £10 million lifetime limit per individual.
Individuals who meet the conditions for this relief should evaluate the potential CGT implications of timing a disposal when it is set to be introduced.
To help minimise CGT, an Employee Ownership Trust (EOT) takes a different approach to a business sale.
EOTs involve a business selling a controlled interest, typically greater than 50 per cent, to a trust which holds shares on behalf of all employees.
Shareholders can obtain favourable CGT treatment, with 50 per cent CGT relief on share disposal where qualifying conditions are met.
As an example, if you sold shares to an eligible EOT and made a gain of £2 million, this would result in £1 million exempt from CGT.
Employees can be paid income-tax-free bonuses of up to £3,600 per year with an EOT, which can be a valuable way to share the benefits of ownership.
While EOTs can allow owners to keep more of the sale proceeds, the price is often paid over several years from the future profits of the company.
It is important to weigh up how staggered payments would impact a tax position and how soon funds are required, particularly if you are planning to retire following a sale.
As few sales result in a lump sum payment on completion, how the price is paid can influence your tax position.
An earn-out is a performance-based way to structure a sale, involving a portion of the purchase price dependent on the future performance of your business.
These payments are valued and taxed on sale completion, with later payments treated as separate gains, sometimes without the added benefit of BADR.
For an earn-out that pays less than anticipated, relief may be available provided it is claimed correctly.
On the other hand, deferred consideration involves a portion of a fixed price paid at a later date.
However, you are normally taxed on the full value of a sale on completion, despite the fact that some of the payment is yet to be received.
If deferred payments are distributed over more than 18 months, you may be able to pay CGT in instalments for up to eight years. This means tax can be paid when money has actually arrived.
Earn-outs and deferred consideration may merit a higher headline price, but they can also result in tax liabilities arriving before you’ve received the full value of a sale.
Before a sale is finalised, our accountants can help determine tax exposure, helping you to understand how much of the sale proceeds you will take home after tax.
We can review your eligibility for BADR and advise on actions that need to be taken in advance to qualify.
Whether you are considering a share sale, an asset sale or an alternative exit strategy, such as an EOT, we can model different structures to evaluate different tax outcomes.
Putting plans in place earlier can keep more options available to reduce your tax bill, so you can keep more of what you’ve built.
Unsure how CGT may impact your business sale? Get in touch with FFT accountants for expert tax planning advice.
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