How to sell a business: steps, valuation and tax in 2026

Selling a business means preparing clean accounts, getting a valuation, choosing a buyer and a deal structure, then working through due diligence and legal completion. Most owners pay Capital Gains Tax on the profit, often at the 18% Business Asset Disposal Relief rate. Timing matters more than usual: Budget 2026 halves the BADR lifetime limit to £500,000 from 6 April 2027.

What are the steps to sell a business?

A typical sale runs through seven stages and often takes 6 to 12 months from first approach to completion.

1. Prepare. Tidy the accounts, settle disputes, document contracts and reduce reliance on you personally.
2. Value the business. Get a valuation from an accountant or corporate finance adviser.
3. Take tax advice early. Check you meet the BADR conditions and whether a share or asset sale suits you.
4. Find a buyer. Trade buyers, private equity, a management buy-out or an Employee Ownership Trust.
5. Agree heads of terms. A short, mostly non-binding document setting out price, structure and timetable.
6. Due diligence. The buyer checks your finances, tax, contracts, staff and legal position.
7. Sign and complete. Lawyers draft the sale agreement, warranties and any deferred payment terms.

How is a business valued?

Buyers usually value a small or medium business on its sustainable profits, its assets, or a mix of both. The right method depends on the type of business.

Profit is normally “normalised” first, adding back one-off costs and adjusting the owner’s salary to a market rate. Recurring income, a spread of customers and a team that runs without you all raise the price. Our guides to reading a balance sheet and reading a profit and loss statement cover the figures buyers will study.

Share sale or asset sale: which applies to you?

A share sale transfers the company itself, while an asset sale transfers selected assets out of it.

• If you own company shares and want a clean exit, a share sale usually suits you. You pay CGT personally and may claim BADR.
• If the buyer wants to avoid the company’s liabilities, expect an asset sale. The company pays Corporation Tax on the gain, and you pay tax again to extract the cash.
• If you are a sole trader or partner, you sell assets such as goodwill, equipment and stock. BADR can still apply.
• If you sell assets and are VAT registered, check whether the sale is a transfer of a going concern (TOGC). If the conditions in HMRC’s VAT Notice 700/9 are met, no VAT is charged on the assets.

How much tax do you pay when you sell a business?

Most sellers pay Capital Gains Tax at 18% on gains that qualify for Business Asset Disposal Relief. Without the relief, gains above the basic rate band are taxed at 24%, according to GOV.UK’s CGT rates page. The annual exempt amount is £3,000 for 2026 to 2027.

To qualify for BADR on shares, GOV.UK says that for at least 2 years before the sale you must:

• be an employee or office holder of the company
• hold at least 5% of the shares and voting rights
• be entitled to at least 5% of profits and assets on a winding up, or of the sale proceeds
• own shares in a trading company or the holding company of a trading group

Sole traders and partners must have owned the business for at least 2 years. See our full guide to Business Asset Disposal Relief or estimate your bill with the Capital Gains Tax calculator.

What changed in Budget 2026?

Budget 2026 on 28 October cut the BADR lifetime limit and proposed a new relief for founders. The main changes are below.

HMRC’s policy paper of 29 October 2026 expects about 13,000 of 51,000 claimants to be affected. For contracts signed before 6 April 2027 that complete later, the £500,000 limit still applies unless you show the timing was not for a tax advantage.

Worked example. A higher rate taxpayer makes an £800,000 qualifying gain (ignoring the annual exempt amount). In 2026 to 2027 the tax is £144,000 (18% of £800,000). From 6 April 2027 it would be £162,000: £90,000 on the first £500,000 at 18% plus £72,000 on £300,000 at 24%.

Founders’ Relief is narrow. You must have held 25% of the shares when trading began, kept them for 5 years and been UK resident for 5 years. The company needs at least £10 million turnover and 15 full-time equivalent staff. It is a proposal under technical consultation, so the details may change.

Employee Ownership Trusts. For sales to an EOT on or after 26 November 2025, HMRC confirms the relief fell from 100% to 50% of the gain, and BADR cannot also be claimed.

What to do now

1. Check your BADR history. Add up past claims against the lifetime limit.
2. Model a sale before and after 6 April 2027. The difference reaches £30,000 on qualifying gains of £1 million or more.
3. Do not rush a contract for tax alone. The anti-forestalling rules target exactly that.

Frequently asked questions

How long does it take to sell a business?

Most small and medium business sales take 6 to 12 months. Preparation beforehand, such as tidying accounts and contracts, can take a year or more.

What is the Business Asset Disposal Relief rate in 2026?

The rate is 18% for qualifying disposals from 6 April 2026. It was 14% in 2025 to 2026 and 10% before 6 April 2025.

When does the £500,000 BADR limit start?

It applies to qualifying disposals on or after 6 April 2027. Until then the lifetime limit is £1 million.

How do I claim Business Asset Disposal Relief?

Claim it on your Self Assessment tax return or using Section A of helpsheet HS275. The deadline is the first anniversary of 31 January after the tax year of the sale.

Do I pay VAT when I sell my business?

A share sale is exempt from VAT. An asset sale is outside the scope of VAT if it meets the transfer of a going concern conditions; otherwise VAT may be due on the assets.