Capital Gains Tax When Selling a Business – Explained

If you are a business owner considering selling your company, you need to know how Capital Gains Tax (CGT) works, and how an accountant can ensure you are (legally) paying the lowest amount of tax possible.

It’s important to note that key changes to the way CGT operates are coming in April 2025, therefore we have written this guide with these in mind.

What is Capital Gains Tax?

In the UK, Capital Gains Tax (CGT) is the tax paid on any profits accrued when selling any personal belongings. 

These belongings are known as ‘chargeable assets,’ and can include:

• Business assets
• Shares (that are not in an ISA or PEP)
• Most personal possessions worth £6,000 or more (excluding cars)
• Property (generally excluding your main home, but CGT is also charged on your main home if you have used it for business, let it out, or the grounds are over 5,000㎡)

You may also see this tax referred to as one you pay on the ‘disposal’ of assets.

Capital Gains Tax when selling a business in 2025

In October 2024, changes were made to Capital Gains Tax rates under the new Labour government.

Previously, you would pay 10% CGT on gains from chargeable assets if you were a basic-rate taxpayer, and 20% if you were a higher-rate taxpayer. 

From 30 October 2024, these rates increased to 18% CGT on gains from chargeable assets for basic-rate taxpayers, and 24% CGT on gains for higher-rate and additional-rate taxpayers.

Capital Gains Tax allowances

You are only required to pay Capital Gains Tax above a certain tax-free allowance threshold. 

This is known as the annual exempt amount and, as of February 2025, stands at £3,000. 

This is a significantly lower threshold than in previous financial years; in the year 2023-24 the annual exempt amount was £6,000, while between 2020 and 2023 this figure was £12,300.

Business Asset Disposal Relief

One way to lower the tax you pay on selling your business is through the government’s Business Asset Disposal Relief scheme.

Those eligible for this relief only pay 10% Capital Gains Tax when selling their business, significantly lower than the 18% rate set for basic-rate taxpayers.

To be eligible for business asset disposal relief you must:

• Have been a sole trader or business partner for at least two years; AND
• Have owned the business you intend to sell for at least two years

How can an accountant help with tax on selling a business?

Hiring an accountant to help with the Capital Gains Tax process is highly recommended.

Firstly, delegating this stage of the business selling process saves you the time and stress of navigating HMRC and ensures that all legal requirements are met. With an accountant’s help you don’t need to worry about any negative impact on your personal tax status.

Secondly, with their expertise, accountants may be able to identify opportunities for you to reduce the amount of Capital Gains Tax you need to pay, whether through the Business Asset Disposal Relief scheme or through other means.

So, if you’re considering selling your business, please get in touch with the friendly team at Archimedia Accounts and we will set up a free consultation to talk you through the Capital Gains Tax process.

FAQs

How long do I have to apply for Business Asset Disposal Relief?

After selling your business, you have several years in which to apply for Business Asset Disposal Relief. Take a look at the table below for a breakdown of the government’s application deadlines: