Many business owners have a number in their head for what they want and need their business to sell for. However, many people overlook the tax implications of selling their businesses, and then what that does to their ideal number. Given that our new prime minster is currently talking about taxing wealth and investments at a similar level to income tax, this means a likely increase to capital gains tax is going to happen in the near future.

So, to help you think through what money you will get after selling, this article talks through the typical capital gains tax bill you could receive depending on how you decide to sell your business.

1. Capital Gains Tax (CGT)

Capital Gains Tax (CGT) works by taxing trade business owners on the profits they have made selling their business. How much you pay is complicated. If you pay basic rate income tax then you pay capital gains tax at 18%. However, if the income you receive from the capital gain takes you into the higher rate tax payer band, you pay capital gains tax at 24%. CGT applies if you’re a sole trader or partnership selling part or all of your business assets. Currently you can make up to £3000 in gains (profit) in a single tax year before paying any capital gains tax.

Example 1:

You sell your very small business on or after 6 April 2026. Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £20,000 and your taxable gains from selling your business are £12,600.

First, deduct the Capital Gains tax-free allowance from your taxable gain. For the 2026 to 2027 tax year the allowance is £3,000, which leaves £9,600 to pay tax on. 

Add this to your taxable income. Because the combined amount of £29,600 is less than £37,700 (the basic rate band for the 2026 to 2027 tax year), you pay Capital Gains Tax at 18%.

This means you’ll pay £1,728 in Capital Gains Tax.

Example 2:

You sell your small business after 6 April 2026. Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £20,000 and your taxable gains are £52,600.

First, deduct the Capital Gains tax-free allowance from your taxable gain. For the 2026 to 2027 tax year the allowance is £3,000, which leaves £49,600 to pay tax on.

Add this to your taxable income. Because the combined amount of £69,600 is more than £37,700 (the basic rate band for the 2026 to 2027 tax year), you will pay Capital Gains Tax at 18% on £17,700 and then 24% on £31,900.

This means you will pay £10,842 in Capital Gains Tax.

We don’t have a crystal ball with what is going to happen with Capital Gains Tax with Burnham as the UK’s new Prime Minster (Correct at time of posting Aug 2026). However, expect that the rates of 18% and 24% go upwards to match income tax rates. This stuff is complicated, so get in touch if you are thinking of selling your business or part of your business.

2. Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief (BADR) or Entrepreneurs Relief offers a reduced rate of Capital Gains Tax (18%) for eligible trade sellers. Of course, whether BADR still exists in the future is a question that needs answering.

But how do you know if you’re eligible?

We will be able to identify whether you’re eligible for this tax relief. But as a general rule of thumb, if you’re selling part or all of your business, you must:

• Be a sole trader or business partner
• Have owned the business for at least two years

3. Employee Ownership Trust (EOT)

Similarly to a Management Buy Out buyers can also sell their shares to an Employee Ownership Trust (EOT). The difference with this government-led initiative is that the previous owner can sell their shares to the trust and get 50% off their capital gains tax bill. This used to be no capital gains tax but the labour government changed this.

Obviously, this is a huge incentive for sellers, but there are criteria you must fulfil to reap such rewards. Some of the requirements are:

• Your shares must be from a trading company. 
• The EOT must acquire over 50% of the company’s shares.
• All employees must receive equal benefits from the EOT.

In summary

Many business owners have a number in their head that they want to sell for and forget that a large chunk of this will taken by HMRC as tax. And Capital Gains Tax is rarely factored into the cost of selling your business. Remember when you are thinking about the number you need that you will be paying 18 – 24% Capital Gains Tax, and potentially more if Burnham changes the rules around BADR and Capital Gains Tax.

Need help reviewing your sales proposal and the potential outcomes?

If you are thinking about selling your business, it’s worth getting advice about the tax implications. We are always happy to chat.

At Jenner’s Tax & Business Advisers, we help you stay one step ahead and make sure you’re not missing opportunities or paying more tax than you need to.

📞 Call us on 01432 379988
Or contact us here to arrange a quick review.