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How much tax will you pay when you sell your company?
Business Asset Disposal Relief in 2026/27: the 18% rate, the £1 million lifetime limit, and the two-year planning clock
CGT on Selling Your Business · 2026/27
How much tax will you pay when selling your company?
Business Asset Disposal Relief at the new 18% rate, the £1 million lifetime limit, and what a second qualifying shareholder changes.
Capital gains tax on the sale
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Illustrative only, not financial advice. Uses 2026/27 figures. Business Asset Disposal Relief is 18% on up to £1 million of qualifying lifetime gains per person. Gains above the limit are taxed at the 24% higher rate. The figures assume your £3,000 annual exempt amount has already been used elsewhere. Assumes you pay tax at the higher or additional rate, and that each qualifying person has a full unused lifetime limit. It also assumes the conditions are met. Broadly, that means two years owning at least 5% of the shares and voting rights, while an employee or office holder. Ignores earlier claims against the lifetime limit, EMI share rules and Investors’ Relief. Talk the sale through with us before terms are agreed, the first conversation is free.
The relief has nearly doubled in cost, the figures first
Business Asset Disposal Relief taxes the gain when you sell a qualifying business at 18% instead of the 24% capital gains rate. Most owners still call it entrepreneurs' relief. The 18% rate applies from 6 April 2026. It is the end of a steep climb. The rate was 10% for two decades until April 2025, then rose to 14%, and is now 18%. Selling in 2026 rather than 2024 costs an extra £80,000 on a £1 million gain.
The relief covers up to £1 million of gains per person over your lifetime, not per business, and not per sale. Above the limit, gains are taxed at 24%. To qualify you must, broadly, have owned at least 5% of the shares and voting rights for two years. You must also have been an employee or office holder of the company. That two-year clock is the planning constraint that matters. The decisions that change the tax bill are who holds shares, how many, and in what structure. They only work if they were made two years before completion.
The most overlooked of those decisions: the £1 million limit is per person. Spouses are treated separately. A second qualifying shareholder can shelter another £1 million at 18%. This is only possible if they genuinely meet the conditions for the full two years. We work through exactly this with business owners and company directors well before a sale is on the table. We also look at how the pension fits around the company.
One thing to know for afterwards: trading business assets can qualify for inheritance tax relief while you hold them. The cash you sell them for does not qualify. From April 2027, unused pensions join your estate too. Our inheritance tax calculator shows that position. You've Sold Your Business, Now What? covers the first year after completion.
Frazer James is an independent, FCA-regulated firm of Certified Financial Planners. Advice covers the whole of the market, there is no initial fee, and the first meeting is free.
The rate nearly doubled
The rate was 10% until April 2025, then 14% for a year, and is now 18%. The increases were set in law and are complete. Even so, they have rewritten every exit plan that was priced on the old rate. The remaining reliefs now deserve more attention, not less.
£1 million each, not per business
The lifetime limit is per person, and spouses and civil partners each have their own. Two qualifying shareholders can shelter £2 million at 18%, a difference worth up to £60,000, but only with the conditions in place two years early.
After the sale, the shelter is gone
Trading business assets can pass free of inheritance tax while you hold them. The sale proceeds are just cash in your estate, and from April 2027, unused pensions join them. Exit planning and estate planning are the same conversation.
Since working together, I feel more organised, more secure and more positive about the future. The advice has been exceptionally valuable, financially, professionally and personally.
Questions owners ask about the relief
What is the Business Asset Disposal Relief rate for 2026/27?
18% on qualifying gains, for disposals from 6 April 2026. The rate was 10% for disposals up to 5 April 2025 and 14% during 2025/26, so the increase is recent and permanent under current legislation. Gains above the lifetime limit, or that don't qualify, are taxed at the standard 24% capital gains rate for higher-rate taxpayers.
What is the lifetime limit for Business Asset Disposal Relief?
£1 million of qualifying gains is allowed per person across your whole lifetime. This limit is not refreshed per business or per sale. Claims made since 11 March 2020 count against it. Spouses and civil partners each have their own separate £1 million limit. Each person must personally meet the qualifying conditions.
Who qualifies for Business Asset Disposal Relief?
For share sales, broadly, you must meet several conditions. For at least two years up to the disposal, you must have been an employee or office holder of the company or its group. You must also have held at least 5% of the ordinary shares and voting rights. You must have had entitlement to at least 5% of profits or disposal proceeds. Sole traders and partners qualify on the business itself, with two years of ownership. The detail matters. Dilution below 5%, or resigning before completion, can lose the relief.
Can my spouse and I both claim Business Asset Disposal Relief?
Yes, each of you has a separate £1 million lifetime limit. This is the single biggest legitimate lever on the tax bill for larger sales. But each person must genuinely meet the conditions for the full two years. These are: real shareholding of 5% or more, real voting rights, and a real role as employee or office holder. Transferring shares to a spouse the year before a sale does not work. Doing it two years and a day before can.
How do I reduce capital gains tax when selling my business?
In practice, establish every available lifetime limit two years early. Use the annual exempt amount. Consider the timing of completion against tax years. Look at how deferred consideration and earn-outs are taxed. Where it genuinely fits, consider pension contributions from the company before the sale. The right combination depends on the deal. This is precisely the planning to do before heads of terms, not after.
Reviewed by
BSc, MLIBF, PETR, Chartered ALIBF · Co-Founder and Chartered Associate
Chris has spent over a decade in financial planning and specialises in research and technical analysis. He checks every figure and calculation on this page before it is published.
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