Tax Considerations

Tax is a central part of any business sale. The way a deal is structured, and the type of reliefs available, can make a significant difference to the final amount an owner receives. While every situation is unique, below are some of the key areas business owners should be aware of.
 

Business Asset Disposal Relief (BADR) – Eligibility and Benefits

Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief) can reduce the rate of Capital Gains Tax (CGT) to 14% on qualifying business disposals, up to a lifetime limit of £1 million in gains.

To qualify, typical conditions include:

• You must have owned the business (or shares in it) for at least two years before disposal.

• If selling shares, you must usually be an employee or office holder of the company.

• You must hold at least 5% of shares and voting rights (for company disposals).

For many business owners, BADR provides a substantial tax saving, but eligibility needs to be reviewed carefully in advance.
 

CGT vs. Corporation Tax on Disposals

The type of sale affects which tax applies:

• Capital Gains Tax (CGT):
  Applies when an individual sells shares in a company or disposes of their own unincorporated business. CGT is charged on the gain, with potential reliefs such as BADR available.

• Corporation Tax:
  If the company itself sells assets (e.g. property, equipment, goodwill) and keeps trading, any gain is usually subject to Corporation Tax at the prevailing rate. The after-tax proceeds remain in the company and may be taxed again when distributed to shareholders.

Understanding whether a deal is structured as a share sale or asset sale is critical, as the tax outcomes can be very different.
 

High-Level Tax Planning Considerations

Some practical steps business owners often explore before a sale include:

• Reviewing ownership structure – Ensuring shares are held in the right names and proportions.

• Using available allowances – Making the most of annual exemptions and reliefs.

• Timing of the sale – Considering financial year boundaries, tax year-end, and market conditions.

• Pension and investment planning – Using proceeds tax efficiently once received.

The earlier planning begins, the more flexibility owners have to optimise their position.
 

Final Thoughts

Tax can significantly affect the outcome of a sale, sometimes more than the negotiated price itself. Preparing early and understanding the basics of reliefs and liabilities can help business owners achieve the best after-tax result.
 

Note: This overview is for general guidance only and should not be considered tax advice. Professional tax advice should always be obtained before selling a business.