CGT When Selling Your Business
Business asset disposal relief can reduce the rate of capital gains tax due on the disposal of qualifying assets and all or part of your business from 20% to 10%. Prior to 6 April 2020, this relief was known as entrepreneurs’ relief.
To qualify, you must have owned the business for the last two years – either as a sole trader or in a business partnership.
If you sell shares or securities, you may also qualify for the relief if you have been an employee or office holder of a ‘trading’ company for two years up to the date the shares are sold.
You must also have at least 5% of both the shares and voting rights, plus be entitled to at least 5% of either the profits that are available for distribution and the assets on winding up, or the disposal proceeds if the company is sold.
Different rules apply to shares from an enterprise management incentive scheme.
If you are closing your business, the same conditions apply, and you must also dispose of any assets owned by the business within three years.
There is no cap on the number of times you can claim the relief, but you can only claim a total of £1m in business asset disposal relief in your lifetime.
Prior to 11 March 2020, this lifetime limit was £10m.
If you have already claimed business asset disposal relief on gains of £1m or more, any future disposals will not qualify for the relief.
Alternatively, if you have never previously claimed business asset disposal relief, only the first £1m will qualify for the 10% relief, with the rest of the disposal taxable at 20% in 2023/24.
Year-End Tax Guide 2023/24
If you would like to access our full year-end tax guide, simply click here to view the PDF.
Alternatively, you can view an area specific mini blog from the list below:
1. Personal Allowances and Reliefs
2. ISAs
5. Property Tax
8. Tax-Efficient Staff Benefits
10. VAT
11. Penalties
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