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Selling your business: CGT, BADR and deal structure

Exit planning

Selling your business: CGT, BADR and deal structure

Selling a business you’ve built is a major moment, and the tax bill depends heavily on how the sale is structured.

SRBy Stephen ReynoldUpdated 11 November 20263 min read
Business owner agreeing the sale of a company
In 30 seconds
  • BADR rate is 18% from 6 April 2026
  • Lifetime BADR limit of £1 million
  • Share sales usually beat asset sales for sellers
  • Earn-outs need careful structuring

Business Asset Disposal Relief now taxes qualifying gains at 18%, but share sales, asset sales, earn-outs and deferred payments all have different results.

This guide explains the main tax considerations when selling a business.

Share sale or asset sale?

Share saleAsset sale
What’s soldYour shares in the companyThe company’s assets
Tax for youCGT, possibly with BADRCorporation Tax in the company, then tax on extracting cash
Buyer preferenceTakes on history and risksPicks assets, often preferred

Business Asset Disposal Relief

BADR applies to qualifying gains up to a £1 million lifetime limit. You must have held at least 5% of shares and votes and been an officer or employee for two years. The rate is 18% from 6 April 2026, up from 14%. Gains above £1 million are taxed at 24%.

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For example

Paul sells his company for £3 million, with a base cost of nil. The first £1 million qualifies for BADR at 18%, £180,000. The remaining £2 million, less his £3,000 exemption, is taxed at 24%, £479,280. His total CGT is £659,280.

Earn-outs and deferred consideration

If part of the price depends on future performance, the right to receive it is valued at the time of sale and taxed then, with further gains or losses later. Earn-outs can sometimes be structured as shares or loan notes to defer tax. Payment linked to continued employment risks being treated as income.

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Pre-sale planning

  • Check BADR conditions are met for two years before sale
  • Consider spreading shares to a spouse to use two BADR limits
  • Extract surplus cash before sale if efficient
  • Clear director’s loan accounts
  • Review pension contributions

Employee Ownership Trusts

Selling a controlling stake to an EOT can be free of CGT. From 30 October 2024, conditions were tightened, with trustees needing to be independent and UK-resident.

Inheritance Tax

Shares in a trading company may qualify for BPR, while cash from a sale doesn’t. Selling can increase your IHT exposure.

See HMRC’s guide to BADR, our CGT service and our tax planning.

What should I do next?

Check BADR eligibility

Two years before sale.

Choose share or asset sale

Tax effect.

Plan earn-outs

Structure matters.

Get exit advice

Talk to us early.

Frequently Asked Questions

What is the BADR rate in 2026/27?

18%.

What is the BADR lifetime limit?

£1 million of qualifying gains.

Is a share sale better than an asset sale?

Usually for the seller, as it avoids double tax.

How are earn-outs taxed?

The right to future payments is valued and taxed at the time of sale, with later adjustments.

Can selling to an EOT be tax-free?

Yes, subject to conditions tightened from October 2024.

Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.

SR

About the Author

Stephen Reynold
I’m Stephen Reynold, an accountant at Wingate Accountants. I work with sole traders and small companies, turning tax rules into clear, practical next steps.

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