Guide to Capital Gains Tax for businesses

Capital Gains Tax (CGT) is a tax charged on the disposal and sale of certain assets. Where you make a profit (or gain), you may have to pay CGT. If you don't make a gain, there will be no tax payable and you make be able to use these losses against other gains you have to lower your CGT bill.

In this guide we focus on Capital Gains Tax for business and where and when CGT may be payable, as well as how CGT is calculated and the deadlines.

What is Capital Gains Tax for business?

Just like individuals, businesses will have assets as part of their business, and when it comes to getting rid of, selling and otherwise disposing of those assets, some could be chargeable to CGT. CGT is the tax that applies to the gain you make when you are selling assets. Self-employed individuals and people in partnerships pay Capital Gains Tax which is taxed at different rates to income tax.

Limited companies may have gains but instead of CGT they will pay corporation tax.

There are many common assets that can be subject to Capital Gains Tax when they are disposed of, these include:

• shares
• bonds
• land and property
• fixtures and fittings, plant and machinery
• the business
• registered trademarks
• goodwill (a business' reputation)

When do you pay Capital Gains Tax?

You pay CGT when you dispose of an asset and make a gain. Disposing of an asset includes selling, gifting, swapping and getting compensation for something destroyed or lost.

The gain is calculated by taking the proceeds from the sale of the asset and deducting the cost of purchase. You can also deduct any costs associated with the sale and purchase such as legal fees.

For example, John runs a business which owns a property. He has decided to sell that property as it is no longer used. The gain of the property can be caculated as:

Sales proceeds*	£120,000
Purchase cost	-£72,000
Purchase expenses	-£1,500
Sale expenses	-£4,500
Gain	£42,000

*If you gave the asset away, sold it for less than its worth, inhertited the asset or owned it before April 1982, you would need to use market value as the sales proceeds instead of what you sold it for.

Not all assets are subject to CGT and there are reliefs that may remove, postpone or minimise the Capital Gains Tax charge.

Do you pay Capital Gains Tax on goodwill?

The sale of goodwill is treated as an asset and there is subject to CGT. There are specific rules around the sale of goodwill to a related company, for example on incorporating your business. It is important that you get tax advice if you are considering a sale.

How is Capital Gains Tax calculated?

The rules for calculating your gain (profit on sale of the asset) are complex. There are available CGT reliefs and exemptions which may lead to significant savings if claimed. Proper tax planning is essential when disposing of assets to make sure you minimise your CGT liability.

Capital Gains Tax rates

For disposals between 6th April 2024 and 29th October 2024, you will pay CGT at 10% on your gains (or 18% on residential property) if you are in the basic income tax band and 20% on your gains (or 24% on residential property) if you are a higher or additional rate taxpayer.

For disposals from 30th October 2024, you will pay CGT at 18% on your gains if you are in the basic income tax band and 24% on your gains if you are a higher or additional rate taxpayer.

CGT rates for carried interest are 18% for basic rate taxpayers and 28% for higher rate taxpayers, with rates increasing to 32% from 6th April 2025.

Annual Exempt Amount

In addition there is a tax-free allowance, know as the Annual Exempt Amount (AEA). This is the amount of gains that can be made in a tax year before having to pay CGT. For 2024/25 and 2025/26 this is £3,000, and unused amounts can't be carried forward.

Capital losses

When you sell an asset you may make a loss. It is important to calculate the loss on the sale of any assets to ensure that you offset that loss against any profits in the same year. If you have made a loss overall then you will want to ensure that this loss is recorded to carry forward against any gains you make in future years.

You will still need to notify HMRC of any sale of assets if the proceeds are four times the tax-free allowance and you are registered for self-assessment but it is worth doing this anyway if you make a loss and expect to make gains in the future.

Calculating Capital Gains Tax on a business sale

As with any other assets, the basics are the same for selling a business. The gain is calculated as sales proceeds less the cost of the purchase and any associated expenses. These basic principles apply whether you are selling a business as a sole trader, partnership or holding shares in a limited company.

In many cases identifying the different elements of this can be complex and very few sales are straight forward. Selling your business may include deferred consideration, contingent elements or consideration in a form other than cash. Also, if you sell or gift at an undervalue there may be implications of doing this.

There are also CGT reliefs you can claim that could minimise your CGT liability. These include Business Asset Disposal relief, roll-over relief or hold-over relief, which may be available. Specific rules and criteria will apply that you need to be aware of and seeking professional tax advice is essential in making informed decisions when selling your business.

How to reduce Capital Gains Tax when selling a business

It is always important to plan any business sale in advance to ensure that you take advantage of CGT relief available and structure the sale in the most tax efficient way. In addition, you will also want to ensure that you are able to maximise its likely sale value. Getting advice early will be essential in achieving this.

TaxAssist Accountants can help you with your Capital Gains Tax

If you are considering selling an asset or all or part of your business, we can advise you of the tax planning opportunities available to you before you make your disposal to mitigate or reduce potential tax liabilities. Call us on 01582 945 622 or use our online enquiry form.

Last updated: 29th May 2025