Owners usually come to the tax question backwards: they agree a price, then ask what they will actually keep. By then, most of the decisions that would have changed the answer have already been made. This guide sets out what those decisions are, in the order you meet them, so your accountant and tax adviser are brought in while there is still something to plan rather than only something to report. It is general information, not tax advice, and rates and rules change: check the current position before you act.
The first decision: what are you actually selling?
If your business is a limited company, you can sell your shares or the company can sell its assets. They are taxed differently. A share sale is usually taxed on you personally as a capital gain, which is where Business Asset Disposal Relief can apply. An asset sale is usually taxed inside the company first, and getting the proceeds out to you afterwards can mean a second layer of tax. Our guide to asset sale versus share sale covers the practical differences; the tax point is simple, raise it with your accountant before you have a preference, because buyers often prefer the opposite route to sellers.
The second decision: do you qualify for a relief, and for which one?
Two routes carry meaningfully different tax treatment from an ordinary trade sale.
- Business Asset Disposal Relief taxes qualifying gains, up to a lifetime limit of £1 million, at 18% rather than the normal Capital Gains Tax rates of 18% to 24%. The conditions are tested over the two years up to the sale: broadly, you need to hold at least 5% of the shares and voting rights, and be a director or employee of a trading company. Our guide to the relief sets out the rate history and where owners get caught.
- Selling to an employee ownership trust currently gives relief on half the gain, down from the full amount before the November 2025 Budget, with the other half taxed at normal rates. It suits owners who value continuity and are comfortable being paid from the company's future profits rather than at completion. Our EOT guide covers the conditions and how the price is actually paid.
Neither relief is automatic, and neither is free of trade-offs: Business Asset Disposal Relief rewards a conventional sale to a trade buyer or through a management buyout, while an EOT sale usually means years of deferred payment from a business you no longer control. The right answer depends on what you are optimising for, cash now, certainty, or the lowest tax rate, and you cannot usually have all three.
The third decision: how is the price actually paid?
Tax is charged on the gain, not on the number in the headline. Cash paid at completion is taxed, and received, in a way that is easy to reason about. An earn-out or deferred consideration can be taxed differently, and sometimes falls due before you have been paid. This is a conversation to have with your tax adviser once heads of terms are on the table, not after. Our guides to earn-outs and heads of terms cover the commercial side; bring the tax side to the same conversation.
Where owners lose options without noticing
- Waiting to check the conditions. Business Asset Disposal Relief looks back two years. A director who stepped down, a shareholding diluted below 5%, or a balance sheet that drifted into holding cash and investments rather than trading, can all break a condition quietly, long before a sale is even planned.
- Treating the relief as the whole answer. At current rates, Business Asset Disposal Relief saves at most £60,000 against the gain it covers, for a higher-rate taxpayer; see the worked example in our BADR guide. It is real money, but it will not turn a bad deal into a good one, and it should not be the reason you choose a buyer.
- Deciding the structure after the price. Share versus asset sale, cash versus deferred, trade sale versus EOT: each changes the tax answer, and each is far easier to negotiate before you have agreed anything than after.
What to bring to your accountant, and when
As soon as a sale is a plan rather than an idea, ask your accountant to confirm, in writing: whether you currently meet the conditions for Business Asset Disposal Relief, what would break them, and what your likely tax position looks like under a trade sale, a management buyout and an EOT sale at your current valuation. That single conversation turns tax from something that happens to you at completion into one more thing you planned for.
See what the business might be worth before tax with the valuation calculator, and the Harvest Score for how ready it is to sell at all. This page is general education, not tax, legal or financial advice. Take advice from your own qualified adviser on your own circumstances.
Common questions
How much tax will I pay when I sell my business?
It depends on how you sell (shares or assets), whether you qualify for Business Asset Disposal Relief, and who you sell to. For a share sale with the relief, qualifying gains up to a £1 million lifetime limit are taxed at 18%, with normal Capital Gains Tax rates of 18% to 24% above that. A trade sale, a management buyout and a sale to an employee ownership trust are taxed differently. Ask your accountant to model your own figures.
Do I pay tax on the whole sale price?
No. Tax is charged on the gain, broadly the difference between what you receive and what you originally paid for the shares or assets, with reliefs applied on top where you qualify. Deferred and contingent payments, such as earn-outs, can also be taxed differently from cash at completion.
When should I start planning the tax on my sale?
Years before, not months. Business Asset Disposal Relief is tested over the two years up to the sale, and some of the fixes that protect it, such as your shareholding or your role as a director, take that long to put right. Deciding too late removes options rather than creating problems.
General information to help you prepare, not tax, legal or financial advice. Rates and rules change; check the current position and take advice on your own circumstances.
