Business asset disposal relief: tax you pay when you sell a business

Do I pay capital gains tax on a business sale?

If you're selling a business, there are extra reliefs available which might mean you can pay less capital gains tax (CGT) when you sell or give away your company.

Business asset disposal relief – known as entrepreneurs' relief until 2020 – could allow you to pay a lower CGT rate (charged at 14% from 6 April 2025, up from 10% previously), when selling a qualifying business. This rate is increasing again from 6 April 2026 to match the standard lower rate of CGT (18%). 

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How does business asset disposal relief work?

The relief means you will be charged CGT at the basic rate (14% for 2025-26), on the first £1m of gains you make in your lifetime.

Given that the higher rate of capital gains is 24%, and selling a business could push even basic-rate taxpayers into paying the higher rate, this is a valuable tax break.

The allowance applies at an individual level, so £1m is the maximum you can claim per person, rather than for each business you sell.

Any gains above the £1m threshold are taxed at the full CGT rate – 24% if you're a higher-rate tax payer (meaning you've received taxable income or capital gains above £50,270 in 2025-26 for most parts of the UK. In Scotland the threshold to pay the full rate is £43,662 in Scotland). Basic-rate taxpayers pay 18% CGT. 

Who can claim business asset disposal relief?

Eligibility for business asset disposal relief depends on the circumstances of the sale.  

When selling all or part of your business, you can claim business asset disposal relief if:

• you are a sole trader or business partner, and;
• you have owned the business for at least two years.

If you're closing down your business, you must dispose of your business assets within three years to qualify for relief. 

When selling shares or securities, you can claim business asset disposal relief if:

• you’re an employee or office holder of the company (or one in the same group)
• the company’s main activities are in trading (rather than non-trading activities like investment) – or it’s the holding company of a trading group.

There are some additional rules depending on whether or not the shares are from an Enterprise Management Incentive (EMI). HMRC's website has more details. 

When selling assets you lent to the business, you can claim business asset disposal relief if:

• you’ve sold at least 5% of your part of a business partnership or your shares in a personal company
• you owned the assets but let your business partnership or personal company use them for at least one year up to the date you sold your business or shares – or the date the business closed.

Find out more: use HMRC's helpsheets for more guidance

Are there any other conditions?

If you're only selling part of a business, then that part business must be capable enough of carrying on as a 'going concern' – accountants' speak for being commercially viable. So if you sold loss-making parts of the business, without the means to continue funding it, this wouldn't qualify.

The rules can be complex, so if you're not sure, it's worth taking advice from a qualified accountant. More details can also be found on HMRC's website.

How does CGT work without business asset disposal relief?

If you or your business don't qualify for business asset disposal relief, you'll need to calculate and pay your capital gains bill in the same way as when selling any other asset. You can find out more in our guide to capital gains tax rates and allowances.

You start by working out the gains you make on the sale of your business.

This means you take the sales price, and deduct what you paid for it, as well as any investments in the business, and any costs relating to buying or selling it.

Once you have that, you deduct your personal allowance. For 2025-26 (the same as 2024-25), you can earn up to £3,000 in capital gains free of tax, and couples can pool their allowances. 

You'll pay CGT on any gain above this threshold – this is charged at 18% for basic-rate taxpayers, and 24% for higher-rate taxpayers.

Bear in mind that your capital gain will count when working out your tax bracket for the year, so even if you're a basic-rate taxpayer, a large capital gain can push you into paying the higher rate.