Capital Gains Tax for Business Owners

When you sell your business or business assets and make a profit, you may need to pay Capital Gains Tax (CGT) on that gain. This applies to sole traders and business partners, though limited companies pay Corporation Tax instead. Understanding what counts as a business asset and how to calculate your gain can help you plan ahead and take advantage of tax reliefs that could reduce your bill.

What counts as a business asset

Capital Gains Tax applies when you sell or 'dispose of' a business asset and make a profit. A disposal means selling, giving away, transferring, or exchanging an asset.

Business assets that may trigger a CGT bill include:

• Land and buildings
• Fixtures and fittings
• Plant and machinery (for example, a digger)
• Shares in a business
• Registered trademarks
• Your business's reputation (known as goodwill)

If you're a self-employed sole trader or in a business partnership, you pay Capital Gains Tax on these assets. Limited companies are treated differently and pay Corporation Tax on profits from selling assets instead.

When you don't pay Capital Gains Tax

You do not need to pay Capital Gains Tax on gifts to your husband, wife, civil partner or a charity. This exemption can be useful when planning succession or winding down your business.

How to calculate your gain

Your gain is the difference between what you paid for the business asset and what you sold it for. This is your starting point for working out whether you owe any tax.

You must use the market value instead of the sale price if:

• You gave the asset away (except to a spouse, civil partner or charity)
• You sold it for less than it was worth to help the buyer
• You inherited the asset and don't know the Inheritance Tax value
• You owned it before April 1982

If someone gave you the asset and claimed Gift Hold-Over Relief, use the amount they originally bought it for. If you paid for the asset but paid less than market value, use the amount you actually paid.

Costs you can deduct

You can reduce your gain by deducting certain costs of buying, selling or improving your asset.

Costs you can deduct:

• Professional fees (such as valuation or advertising costs)
• Costs to improve assets (but not normal repairs or maintenance)
• Stamp Duty Land Tax
• VAT (unless you can reclaim it)

Costs you cannot deduct:

• Interest on a loan used to buy your asset
• Costs you can claim as business expenses elsewhere

If you're unsure whether a specific cost can be deducted, contact HMRC for guidance.

Tax reliefs that can reduce your bill

Several tax reliefs can reduce or delay the Capital Gains Tax you pay on business assets. In the 2025/26 tax year, these are the main reliefs available:

Business Asset Disposal Relief

This relief lets you pay Capital Gains Tax at 14% on qualifying gains (for disposals from 6 April 2025 to 5 April 2026), instead of the normal rates which can be higher. For disposals made on or before 5 April 2025, the rate was 10%, and from 6 April 2026 onwards it will be 18%.

You can claim this relief if you're a sole trader, business partner, or own shares in a 'personal company' and you're selling all or part of your business.

Business Asset Rollover Relief

This relief lets you delay paying Capital Gains Tax when you sell certain business assets and replace them with new ones. You must buy the replacement asset within 3 years of disposing of the old one (or up to one year before). Both the old and new assets must be used only for trading.

Incorporation Relief

If you transfer your business to a limited company, Incorporation Relief lets you delay paying Capital Gains Tax. To qualify, you must transfer all your business and its assets (except cash) in exchange for shares in the company.

Gift Hold-Over Relief

When you give away a business asset you've used for trading as a sole trader or partner, you can claim Gift Hold-Over Relief to pay no Capital Gains Tax. The person who receives the asset will pay tax when they eventually sell it.

Reporting your gain or loss

Once you've calculated your gain and any reliefs, you need to work out if you must report and pay Capital Gains Tax. This depends on the size of your gain and your annual CGT allowance.

If you're in a business partnership, each partner must work out their share of any gain or loss. The nominated partner must complete form SA803 to report disposals of chargeable assets.

If you make a loss on selling business assets, different rules apply for reporting this to HMRC.

If you use your home for business

When you sell your main home, you normally receive Private Residence Relief, which means you pay no Capital Gains Tax on the sale. However, if you've used part of your home exclusively for business, you must pay Capital Gains Tax on that portion when you sell.

This only applies to areas used solely for business. If you use a room for both business and personal purposes (such as working at the dining room table), this doesn't create a CGT liability.

Sources

• Capital Gains Tax for business

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.