Capital Gains Tax and your limited company: who pays what

If you're selling your company, or an asset it owns, the first thing to settle is who HMRC will be taxing. Your company doesn't pay Capital Gains Tax: a gain it makes on selling an asset is charged to Corporation Tax, and the proceeds stay inside the company. Capital Gains Tax lands on you as an individual, most often when you sell your own shares. Most of what's written about Capital Gains Tax and business is aimed at sole traders and partnerships, which is why so much of it reads oddly when you run a limited company.

You and your company are two separate legal persons, and that single fact decides almost everything that follows. When your company sells something it owns for more than it paid, the profit is a chargeable gain, and it's charged to Corporation Tax at 25%, or 19% if its profits are £50,000 or less.

Between £50,000 and £250,000 you can claim Marginal Relief, which tapers the rate between the two. Both thresholds shrink for a short accounting period and are divided by the number of associated companies you have, so a group reaches the main rate sooner than a single company does.

Capital Gains Tax is a tax on individuals. That's why gov.uk's own guidance on Capital Gains Tax for business is written for sole traders and business partners: for them, the owner and the business are the same person for tax, so the gain is theirs. Yours belongs to the company.

Almost anything your company owns can produce a chargeable gain – land and buildings, fixtures and fittings, plant and machinery, shares, a registered trademark, and the goodwill that goes with the business, which is the reputation and customer connection a buyer is really paying for.

Where Capital Gains Tax reaches you is on what you hold in your own name, and for most directors that means one thing: your shares in the company.

The gain is what your company sold the asset for, minus what it paid, minus the costs of buying and selling it. Only the gain is taxed, never the sale price.

So if your company bought a workshop for £180,000, spent £12,000 on legal and agent fees across the two transactions, and sold it for £300,000, the chargeable gain is £108,000. At the 25% main rate that's £27,000 of Corporation Tax.

There's one relief here that applies to your company and not to you personally, and it's easy to miss. Indexation allowance used to strip inflation out of a company's gain. It was frozen from 1 January 2018, so a gain your company makes now still gets indexation, but only up to December 2017. The longer your company held the asset before 2018, the more that's worth, and your accountant will need the original purchase date and cost to work it out.

The tax is paid with the rest of your Corporation Tax, 9 months and 1 day after the end of the accounting period the disposal falls in. That's a long gap, and it catches people out: a sale in the first month of the financial year can sit for well over a year before anything is due, which is long enough to spend the proceeds and be surprised by the bill. If your company's taxable profits go above £1.5 million you pay Corporation Tax in instalments instead, and the first one can land before the year has even ended. It's worth checking when your Corporation Tax is due as soon as a sale looks likely.

Your shares are yours, not your company's, so when you sell them the gain is yours and Capital Gains Tax applies. For most directors this is the one disposal that really matters, and the point at which the tax changes hands.

From 6 April 2026 the Capital Gains Tax rate is 18% on the part of your gain that falls inside the basic rate Income Tax band, and 24% above it. You work out which applies by adding your taxable gain to your taxable income and seeing where the total lands, so a large gain is mostly taxed at 24% even if your salary is modest. Your first £3,000 of gains in the 2026 to 2027 tax year is covered by the annual exempt amount.

You'll still see 28% quoted in plenty of places. On a share sale the rate is 18% or 24%: 28% stopped applying to this kind of gain on 29 October 2024.

Business Asset Disposal Relief charges 18% on qualifying gains, up to £1 million over your lifetime. If you've read that you have to be a sole trader or own the business outright to claim it, that's half the rule, and it's the half that doesn't apply to you.

The relief has two routes in. One is for people who own a business. The other is for people who own shares, and that's the one you need. To qualify on a share sale, all of the following must have been true for at least two years up to the date you sell:

• You're an employee or office holder of the company, or of another company in the same group. Being a director counts.
• The company's main activities are trading, rather than non-trading activities like investment. A trading group's holding company also qualifies.
• The company is your 'personal company': you hold at least 5% of both the shares and the voting rights, and you're entitled to at least 5% of either the profits available for distribution and the assets on a winding up, or the proceeds if the company is sold.

If the company stops trading you can still claim, as long as you sell the shares within three years. Shares from an Enterprise Management Incentive follow different rules, so check those separately.

The rate has moved twice in two years, and what counts is the date of the disposal, not the date the money arrives. It was 10% for disposals on or before 5 April 2025, 14% for disposals between 6 April 2025 and 5 April 2026, and 18% from 6 April 2026.

A deal that completes a day either side of 6 April changes the rate on the whole qualifying gain. The £1 million is a lifetime total rather than a per-sale allowance, and there's no limit on how many times you claim until you've used it up. You claim through your Self Assessment tax return, and for a disposal in the 2025 to 2026 tax year the deadline to claim is 31 January 2028.

One thing to watch if you're years away from selling: the trading condition looks at what the company actually does. A large pile of cash it doesn't need for trading can put the relief at risk. Cash you're holding for tax bills and a sensible buffer is normally just part of running the business, but where the line falls for your company is a question for your accountant, and a better one to ask well before a sale than during one.

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Whether the tax lands on you or on your company is decided by how the deal is structured, not by what the business does. In a share sale you sell your shares and the gain is yours. In an asset sale your company sells its assets, pays Corporation Tax on the gain, and the proceeds stay in the company. Same business, two different tax bills.

That second step is the one sellers miss. After an asset sale the money belongs to your company rather than to you, so getting it out means a dividend, a salary, or winding the company up, each with its own tax. Selling your business as a share sale skips that step, because the buyer pays you directly. Side by side, the difference comes down to three things:

Neither structure is simply better, and a buyer often prefers the asset route: they can pick what they take on, leave the liabilities behind, and may be able to claim capital allowances on what they buy. Their position is different again if they're buying a business through a company of their own. Either way it's part of the price conversation rather than a separate decision.

Two more things move the numbers. The first is how much of the price arrives at completion, because if part of it is paid in instalments or through an earn-out the tax treatment and the timing both shift. The second is how the price was set, because the gap between what the business is worth on its assets and what a buyer will pay is goodwill, and goodwill is a chargeable asset.

All of this is hard to unpick once heads of terms are signed, so it belongs with your accountant before you agree a price rather than after. It matters most if a single sale is the bulk of what you'll ever take out of the company, or if you hold just over or just under the 5% that Business Asset Disposal Relief turns on. In both cases a decision made for commercial reasons quietly changes your tax bill too.

If you haven't found a buyer yet, manda, iwoca's mergers and acquisitions service, works on UK small businesses typically valued between £500k and £10m. We write your financials up into a verified report before price talks begin – that takes a week, not months. You then negotiate price, structure, and payment terms with our transaction managers running the process around you, and the last two are what move the tax. Sellers pay nothing until the deal completes.

A property your company owns is a company asset, so a gain on selling it is a chargeable gain taxed under Corporation Tax, at the same 25% or 19% as any other company profit. Capital Gains Tax doesn't come into it.

Two things make a property different in practice. It's usually the asset your company has held longest, so indexation allowance up to December 2017 can take a real bite out of the gain. And it's the disposal most likely to be followed by another purchase, which brings rollover relief into play.

Business Asset Rollover Relief lets a trading business defer the gain by reinvesting the proceeds in new qualifying assets. You buy the new assets within three years of selling the old ones, or up to one year before; the business has to be trading at both ends; and both the old and the new assets must be used only for trading. HMRC's guidance on rollover relief sets the conditions out for any trading person under sections 152 to 159A of the Taxation of Chargeable Gains Act 1992, which includes a company paying Corporation Tax – so this is your company's relief to use, not only yours.

It defers the tax rather than cancelling it. The gain comes back when your company sells the replacement asset without reinvesting again.

Two more reliefs change when the tax is paid, or whether it arises at all. One is for shares you give away rather than sell, and the other is for a company selling a subsidiary.

Gift Hold-Over Relief is the one to know about if you're handing shares to the next generation. You don't pay Capital Gains Tax when you give the shares away; the person receiving them picks up your original cost, and pays on the whole gain when they eventually sell. The company has to be unlisted or your personal company, and mainly trading. You and the recipient claim it together, at the time of the gift, so it isn't something to sort out later.

The substantial shareholdings exemption matters when it's your company doing the selling rather than you. If your company has held at least 10% of another company's ordinary share capital, with an entitlement to at least 10% of its distributable profits and winding-up assets, for a continuous 12 months ending no more than five years before the disposal, and that company meets the trading conditions, the gain isn't normally chargeable at all. There's nothing to claim: if the conditions are met, the exemption applies. A loss on the same disposal isn't allowable either.

Both carry more conditions than are set out here, so treat them as a conversation with your accountant rather than a judgement call. There are also other business tax reliefs that are easy to miss in the same year.

Your company's gain goes in its Company Tax Return. Your own gain goes either in your Self Assessment tax return or through HMRC's real-time Capital Gains Tax service, and those two have different deadlines – which is where the published guidance on this most often gets muddled.

Through Self Assessment you report the gain in the tax year after the disposal. An online return is due by 31 January, a paper one by 31 October, and the tax is due on 31 January. Through the real-time Capital Gains Tax service you report by 31 December in the tax year after the gain and pay by 31 January. If you're already registered for Self Assessment, you'll need to include the sale in your return as well.

Missing the filing date costs £100 straight away. After 3 months that becomes £10 a day up to £900, and at 6 months and again at 12 months there's a further 5% of the tax due or £300, whichever is greater. Paying late is charged separately, at 5% of the unpaid tax at 30 days, 6 months, and 12 months, with interest on top. There's more on penalties for paying late if a deadline has already gone.

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Frequently asked questions

How do you avoid Capital Gains Tax in a limited company?

You can't avoid the tax on a genuine disposal, and anything presented as a way to do that is worth treating carefully. What you can do is use the reliefs as they're intended.

Business Asset Disposal Relief cuts the rate on your shares, rollover relief defers a company gain into a replacement asset, Gift Hold-Over Relief covers shares you pass on rather than sell, and the substantial shareholdings exemption applies where your company sells a trading subsidiary. Which of these fit depends on your position, so get them checked.

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Do I have to report a gain below the annual exempt amount?

You don't usually have to report a gain that's inside the £3,000 annual exempt amount. The exception is if you're registered for Self Assessment and the total you sold the assets for came to more than £50,000, in which case it goes in your return even though there's no tax to pay.

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Is the sale of a business subject to VAT?

It depends on the structure. A share sale isn't a supply of goods or services for VAT. An asset sale can be, although selling as a transfer of a going concern takes it outside VAT if the conditions are met.

Get this one confirmed before you agree the deal, because it changes what the buyer actually hands over.

Before you act on any of this, talk to an accountant or a tax adviser about your own position. Nothing above is tax advice, and the reliefs all turn on details that only someone looking at your company's accounts and your own tax position can confirm. Every rate, allowance, and limit here was checked against gov.uk and HMRC guidance on 14 October 2026, and rates can change at a Budget.