Selling a business is one of the largest financial transactions most people will ever make — and the tax bill can be a nasty surprise if you haven’t planned for it. A sole trader who sells a business for £200,000 might assume they owe CGT on £200,000. In reality, the tax is calculated asset by asset, with different rules for goodwill, equipment, stock, and debtors — and the reliefs available can reduce the rate from 24% to 18%, or defer the gain entirely.
This guide covers the full picture: how each asset is taxed, the 2026/27 rates and allowances, the three reliefs that can reduce or defer your bill (Business Asset Disposal Relief, Rollover Relief, and Gift Hold-Over Relief), and how to report the sale on your Self Assessment return.
How Selling a Business Is Taxed: Asset by Asset
The first thing to understand is that HMRC doesn’t tax the sale of a business as a single event. Each asset is treated separately, with its own gain or loss calculation. According to HMRC’s guidance on selling your business, you must finalise your business tax affairs and report any capital gains on your Self Assessment return.
Here’s how each type of asset is treated:
Goodwill and intellectual property
Goodwill — the value of your customer base, reputation, and brand — is a capital asset. Selling it triggers a Capital Gains Tax charge. If you built the business from scratch, your base cost is £0, so the entire market value of the goodwill is a gain. If you bought the business from someone else, your base cost is what you paid for the goodwill at that time.
According to HMRC’s Capital Gains Manual (CG68050), goodwill is inseparable from the business in which it’s generated. When a business is transferred as a going concern, the goodwill is treated as disposed of to the new owner — even if it doesn’t appear on the balance sheet. There must be a separate CG computation for goodwill.
Intellectual property (trademarks, patents, copyrights) follows the same rules as goodwill if it’s a capital asset of the business.
Equipment and fixtures
Equipment, machinery, vehicles, and fixtures are capital assets. The gain or loss is the sale proceeds minus the original cost (or market value if you’ve claimed capital allowances). If you’ve claimed capital allowances on the asset, the tax treatment depends on whether you’re selling it for more or less than its tax written-down value — but for CGT purposes, the calculation is proceeds minus original cost.
If you’re selling the assets as part of the business (not individually), the proceeds are allocated across the assets on a “just and reasonable” basis. Get this allocation right — it affects which assets have gains and which have losses.
Business property
If you own business premises personally (not through a company), selling them as part of the business triggers a CGT charge on the gain. The gain is calculated as sale price minus original cost, with any capital improvements added to the cost. If the property is your business premises and you’ve used it wholly for business, it qualifies for the same reliefs as other business assets (BADR, Rollover Relief).
Property gains can be large, so plan carefully. If you’re selling the business and the property together, consider whether a separate property sale might be more tax-efficient — and get professional advice.
Stock and debtors: not CGT
Stock (inventory) and debtors are not capital assets. They’re taxed as trading income in your final set of accounts, not as capital gains. The proceeds from selling stock and collecting debtors are part of your final trading profit, taxed at your income tax rate via Self Assessment.
This distinction matters because it means you can’t use the £3,000 CGT annual exempt amount or Business Asset Disposal Relief on stock or debtors. They’re income, not capital.
Cash
Cash in the business bank account isn’t a capital asset — it’s already been taxed as trading income. Withdrawing it when you close the business doesn’t trigger a new tax charge.
The 2026/27 CGT Rates and Allowances
Capital Gains Tax rates changed significantly in late 2024 and again in April 2025 and 2026. Here are the current rates for the 2026/27 tax year:
| Taxpayer type | CGT rate 2026/27 |
|---|---|
| Basic rate (income £12,570–£50,270) | 18% |
| Higher rate (income £50,270–£125,140) | 24% |
| Additional rate (income above £125,140) | 24% |
| With Business Asset Disposal Relief | 18% |
The annual exempt amount (the tax-free allowance for capital gains) is £3,000 for 2026/27. This is per individual, not per asset — so if you sell multiple business assets, the £3,000 is split across all gains, not applied to each one.
How the basic rate band works with CGT
If you’re a basic-rate taxpayer, the rate you pay on gains depends on whether your gains push your total income into the higher-rate band. According to HMRC’s CGT rates guidance:
- Work out your taxable income (income minus Personal Allowance and other reliefs).
- Work out your total taxable gains (gains minus the £3,000 annual exempt amount).
- Add the taxable gains to your taxable income.
- If the combined amount is within the basic rate band (£37,700 for 2026/27), you pay 18%.
- Any amount above the basic rate band is taxed at 24%.
This means a basic-rate taxpayer with a large gain can end up paying 24% on part of it — even though their income tax rate is 20%.
Business Asset Disposal Relief: 18% on Qualifying Gains
Business Asset Disposal Relief (BADR) — formerly known as Entrepreneurs’ Relief — is the single most valuable relief available when selling a business. It reduces the CGT rate to 18% on qualifying gains, up to a £1 million lifetime limit.
For a higher-rate taxpayer with a £200,000 gain, BADR reduces the tax from £48,000 (24% × £200,000) to £36,000 (18% × £200,000) — a saving of £12,000.
The BADR rate changes
The BADR rate has been increasing:
| Disposal date | BADR rate |
|---|---|
| On or before 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| From 6 April 2026 | 18% |
The £1 million lifetime limit has been in place since 11 March 2020 (it was £10 million before that). Any BADR you claimed before that date counts towards your lifetime limit.
Who qualifies for BADR
To qualify for BADR when selling all or part of a business, both of the following must apply for at least 2 years up to the date you sell (or the date the business ceased, if you’re closing rather than selling):
- You’re a sole trader or business partner
- You’ve owned the business for at least 2 years
The business must be a trade, profession, or vocation conducted on a commercial basis with a view to making profits. According to HMRC’s Capital Gains Manual (CG63965), investment activities that don’t constitute a trade don’t qualify.
If you’re closing the business rather than selling it, you must dispose of your business assets within 3 years to qualify for BADR.
How to claim BADR
According to HMRC’s helpsheet HS275, you must claim BADR in writing by the first anniversary of 31 January following the end of the tax year in which the qualifying disposal takes place. For a disposal in 2026/27 (ending 5 April 2027), the claim deadline is 31 January 2029.
You can claim on your Self Assessment return. If you’ve already filed the return, you can make a standalone claim in writing to HMRC within the same deadline.
How to work out the tax with BADR
The calculation, per HMRC’s BADR work-out guidance, depends on whether all your gains qualify for BADR or only some do:
If all gains qualify:
- Add together all qualifying gains and deduct qualifying losses.
- Deduct the £3,000 annual exempt amount.
- Pay 18% on what’s left.
If only some gains qualify:
- Use your annual exempt amount against the gains charged at the highest rate first (24% gains).
- Use any remaining allowance against the BADR gains.
- Pay 18% on the BADR gains, 24% on the non-BADR gains.
Rollover Relief: Deferring the Gain by Reinvesting
If you’re selling your business but planning to buy new business assets — perhaps you’re starting a new business, or buying a property for one — Business Asset Rollover Relief can defer the CGT.
Rollover Relief works by rolling the gain from the old asset into the base cost of the new asset. You don’t pay tax now — but when you eventually sell the new asset, the deferred gain becomes payable.
Conditions
- You must sell qualifying business assets (equipment, buildings, land, fixed plant, goodwill in some cases).
- You must reinvest the proceeds in new qualifying business assets within 3 years of the sale (or up to 1 year before).
- Your business must be trading when you sell the old assets and buy the new ones.
- Both old and new assets must be used for trading purposes.
If you haven’t bought the new assets yet, you can claim provisional relief — giving you time to reinvest without paying tax immediately. You must buy the new assets within 3 years, or the relief is withdrawn and the tax becomes due.
When Rollover Relief makes sense
Rollover Relief is useful when you’re selling a business but not retiring — you’re reinvesting the proceeds into a new venture. It defers the tax, but doesn’t eliminate it. The gain is effectively “frozen” into the new asset’s base cost, so when you eventually sell that asset, you’ll pay CGT on both the original gain and any new gain.
Gift Hold-Over Relief: Giving the Business Away
If you’re giving the business to a family member rather than selling it, Gift Hold-Over Relief can defer the CGT.
With Hold-Over Relief:
- You don’t pay CGT when you give away the business assets.
- The recipient inherits your base cost — so when they eventually sell, they pay CGT on the gain from your original cost to the eventual sale price.
- The relief must be claimed jointly with the recipient.
This is useful for succession planning — passing a business to a child, for example. The recipient doesn’t pay tax on receipt, but they inherit the deferred gain. If they hold the assets until they die, the gain may be wiped out by the CGT uplift on death (assets are rebased to market value at death for CGT purposes).
According to HMRC’s helpsheet HS295, the relief covers gifts of business assets, unlisted shares in trading companies, and agricultural land. You must claim it at the time of the gift, using the form in the helpsheet, attached to your Self Assessment return.
What Happens If You Just Close the Business
If you cease trading and don’t sell the business as a going concern, the tax treatment is different:
- Goodwill is treated as having ceased to exist. According to HMRC’s Capital Gains Manual (CG68070), if the cessation is permanent, any goodwill is deemed to have been disposed of for £0 — which means you can claim a capital loss if you originally paid for the goodwill. If you built it from scratch (cost £0), there’s no loss and no gain.
- Equipment and assets that you keep for personal use are treated as a disposal at market value. If you sell them later, the disposal is at the actual sale price.
- Stock that you keep is treated as a sale at market value and taxed as trading income.
You can still claim BADR if you close the business — the 2-year ownership rule and the 3-year asset disposal rule apply. See our guide on closing a limited company for the company equivalent (striking off vs MVL).
Worked Example: Selling a Sole Trader Business
Let’s work through a concrete example to show how the calculation works.
Scenario: Sarah has run a graphic design business as a sole trader for 6 years. She sells it to an unconnected buyer for £150,000. The sale breaks down as:
- Goodwill: £100,000 (she built the business from scratch, so base cost is £0)
- Equipment (computers, office furniture): £20,000 (original cost £25,000)
- Stock (unused design materials): £10,000 (cost £8,000)
- Debtors: £20,000 (face value)
Sarah’s income from her job is £45,000 in 2026/27.
Step 1: Separate capital gains from trading income
Capital gains:
- Goodwill: proceeds £100,000, cost £0, gain = £100,000
- Equipment: proceeds £20,000, cost £25,000, loss = £5,000
Trading income (taxed as income, not CGT):
- Stock: proceeds £10,000, cost £8,000, profit = £2,000 (added to final trading profit)
- Debtors: £20,000 collected (added to final trading profit)
Step 2: Calculate the net capital gain
Net gain = £100,000 (goodwill) - £5,000 (equipment loss) = £95,000
Step 3: Apply the annual exempt amount
£95,000 - £3,000 (annual exempt amount) = £92,000 taxable gain
Step 4: Apply BADR
Sarah has owned the business for 6 years (more than the 2-year minimum), so she qualifies for BADR. The full £92,000 is taxed at 18%:
£92,000 × 18% = £16,560 CGT due
Without BADR, the calculation would be:
- Sarah’s taxable income: £45,000 - £12,570 (Personal Allowance) = £32,430
- Basic rate band remaining: £37,700 - £32,430 = £5,270
- £5,270 taxed at 18% = £948.60
- £86,730 taxed at 24% = £20,815.20
- Total CGT without BADR: £21,763.80
BADR saves Sarah £5,203.80 in this scenario.
Step 5: Report on Self Assessment
Sarah reports the gains on the Capital Gains Tax summary pages (SA108) of her 2026/27 Self Assessment return. She claims BADR on the same return. The claim deadline is 31 January 2029.
How to Report the Sale on Your Self Assessment
When you sell your business, you have two reporting obligations:
-
Tell HMRC you’ve ceased trading. According to HMRC’s guidance on selling your business, you must put the date you stopped trading on your Self Assessment return. You can also use the online form to tell HMRC you’ve sold the business — it covers both Self Assessment and National Insurance.
-
Report the capital gains. File the Capital Gains Tax summary pages (SA108) with your Self Assessment return. Each asset disposal needs a separate computation — goodwill, equipment, property. Don’t report the total sale price as a single figure.
Claiming reliefs
- BADR: Claim on your Self Assessment return, or in writing within the deadline (first anniversary of 31 January following the tax year of disposal).
- Rollover Relief: Claim using form HS290, attached to your Self Assessment return, within 4 years of the end of the tax year when you bought the new asset.
- Gift Hold-Over Relief: Claim jointly with the recipient using the form in HS295, attached to your Self Assessment return.
If you forgot to claim a relief
If you’ve already filed your return and realise you missed a relief claim, you have 12 months after the filing deadline to amend the return. For the 2026/27 tax year (filed by 31 January 2028), you can amend until 31 January 2029. See our guide on what to do if you made a mistake on your Self Assessment for the full process.
The Bottom Line
- Each asset is taxed separately. Goodwill and equipment are capital gains; stock and debtors are trading income. Don’t report the total sale price as a single CGT figure.
- The 2026/27 CGT rates are 18% and 24%, with a £3,000 annual exempt amount. The rate you pay depends on your income tax band and the size of your gain.
- Business Asset Disposal Relief reduces the rate to 18% on qualifying gains, up to a £1m lifetime limit. You must have owned the business for at least 2 years.
- Rollover Relief defers the gain if you reinvest in new business assets within 3 years. Useful if you’re starting a new venture.
- Gift Hold-Over Relief defers the gain if you give the business away. The recipient inherits your base cost.
- Closing the business triggers a deemed disposal of all assets. Goodwill is treated as having ceased to exist (a loss if you paid for it, nothing if you built it from scratch).
- Report on SA108 with a separate computation for each asset. Claim reliefs on the same return or in writing within the deadline.
- Get professional advice if the gain is large, the assets are complex, or you’re unsure which relief applies. The cost of advice is typically a fraction of the tax it can save.
For the broader context of how CGT fits into your overall tax position, see our Personal Tax Allowance 2026 guide. If you’re incorporating rather than selling, see our sole trader to limited company guide for Incorporation Relief and the CGT implications of transferring assets to a company. For fixing mistakes on a return you’ve already filed, see what to do if you made a mistake on your Self Assessment.