Capital gains tax

Also called CGT, Business Asset Disposal Relief

Tax on the profit made when you sell an asset, including a business or shares in one.

What it means

Capital gains tax is charged on the gain — proceeds minus what you paid and certain costs — when you dispose of an asset. Selling a business, selling shares, or selling commercial property can all trigger it.

Business Asset Disposal Relief, formerly Entrepreneurs' Relief, can reduce the rate on qualifying business disposals up to a lifetime limit.

Why it matters

For most owners the sale of the business is the largest single financial event of their working life, and the difference between a well-planned and an unplanned disposal is measured in six figures.

The qualifying conditions for relief generally require a minimum holding period, so the planning has to happen well before the sale — often two years or more.

What it looks like in practice

Check the qualifying conditions early: shareholding percentage, officer or employee status, and the holding period all matter, and all are fixable years ahead and not weeks ahead.

Asset sale versus share sale is a fundamental structural choice with very different tax outcomes for buyer and seller. It is negotiated, and it is worth understanding before the negotiation starts.

What to watch out for

Restructuring shortly before a sale, which can restart clocks.

Assuming the relief will still exist and still be at the current rate. It has been reformed repeatedly.

Where to get proper advice

A tax adviser with transaction experience, engaged well before you go to market. GOV.UK holds the current rates and conditions.