A limited company does not pay a separate capital gains tax. When the company sells a business asset at a profit, the gain is added to its trading profits for the period and taxed under corporation tax at rates between 19% and 25%. Shareholders sit in a different system: when an individual sells shares in the company, they pay personal capital gains tax at 18% or 24% for the 2026–27 tax year, depending on their income. The two layers are independent, and each has its own reliefs.
How the Company Is Taxed When It Sells Assets
Under the Taxation of Chargeable Gains Act 1992, a profit made when a limited company disposes of property, equipment, or investments is a chargeable gain. It is not taxed on its own. It joins the company’s other profits for the accounting period and is taxed at whatever corporation tax rate applies to that total.
For the financial year beginning April 2026, the rates are unchanged. Companies with total profits under £50,000 pay the small profits rate of 19%. Companies with profits above £250,000 pay the main rate of 25%. Profits between those two figures attract marginal relief, which lifts the effective rate gradually from 19% toward 25%.1GOV.UK. Corporation Tax Rates and Allowances
Watch the associated companies rule. If your company has associated companies, both the £50,000 and £250,000 thresholds are divided by the number of active companies. A modest group can end up in the main rate band sooner than owners expect.
Reliefs That Reduce or Defer the Company’s Gain
Indexation Allowance for Pre-2018 Assets
Assets held before January 2018 can benefit from the indexation allowance, which strips out inflation between the acquisition date and December 2017. The allowance was frozen at December 2017 values, so nothing further accrues no matter when the asset is sold.2GOV.UK. Corporation Tax: Removal of Capital Gains Indexation Allowance from 1 January 2018
To calculate it, take the inflation factor for the month of acquisition from HMRC’s Indexation Allowance tables, multiply by the original cost, and deduct the result from the gain.3GOV.UK. Corporation Tax When You Sell Business Assets Assets bought after December 2017 get no indexation at all. Good acquisition records matter here; without them, HMRC can challenge the figure.
Rollover Relief
A company can defer the gain on a qualifying business asset if it reinvests the proceeds in another qualifying asset. The gain is rolled into the cost base of the replacement, so the tax is pushed into the future rather than cancelled. Reinvestment must happen within a window running from one year before the disposal to three years after.
Land, buildings, and fixed plant and machinery qualify. Shares and financial investments do not. The relief suits companies upgrading premises or equipment.
Substantial Shareholdings Exemption
When a company sells shares in another company, the Substantial Shareholdings Exemption can wipe out the chargeable gain entirely. The seller must have held at least 10% of the target’s ordinary share capital for a continuous twelve months within the six years before the disposal, and the target must be a trading company. Where those conditions are met, the gain is fully exempt from corporation tax. It is one of the most valuable corporate reliefs going and worth checking early in any inter-company share sale.
How Shareholders Are Taxed When They Sell Shares
Individual shareholders pay capital gains tax on their own account when they dispose of their shares. A disposal is not only a sale. It also covers gifting shares, exchanging them in a takeover, and having the company buy them back.4GOV.UK. Capital Gains Manual – CG58650 – Company Purchases Own Shares: Capital Treatment: CGT Liability The tax falls on the shareholder personally and has nothing to do with the company’s corporation tax bill.
For the 2026–27 tax year, gains on shares are taxed at 18% for basic-rate taxpayers and 24% for higher-rate and additional-rate taxpayers.5GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances The rate depends on where the gain sits once added to your income for the year. If your income is close to the basic-rate threshold, part of the gain can be taxed at 18% and the rest at 24%. UK residents pay on worldwide gains; non-residents are generally only within scope on UK property.
Gifts and Sales to Family or Related Companies
Passing shares to a spouse, sibling, parent, child, business partner, or a company you control does not sidestep the tax. HMRC treats transactions between connected persons as happening at market value, regardless of what actually changes hands.6GOV.UK. Capital Gains Manual – CG14560 – Transactions Between Connected Persons A gift for nothing, or a sale at a friendly price, produces a gain calculated on what the shares were really worth on the day.
Connected persons include spouses, civil partners, siblings, parents, children, their spouses, and companies under common control. A professional valuation is sensible for any transfer of this kind, because HMRC will look at the deemed proceeds rather than the paperwork.
Working Out the Taxable Gain on Shares
The gain is the difference between what you received (or are deemed to have received) and your allowable costs. Allowable costs include the original purchase price, stamp duty paid on acquisition, brokerage fees, and professional fees directly incurred to sell the shares. Legal costs on the transaction also count.
Once costs are deducted, apply the Annual Exempt Amount. For 2026–27 it stays at £3,000 per individual.7HM Revenue & Customs. Capital Gains Tax Rates and Allowances On a modest disposal that helps; on a six- or seven-figure exit it barely registers.
Where you acquired shares in the same company at different times and prices, HMRC’s matching rules decide which shares you are treated as selling. Shares bought on the same day as the sale are matched first, then shares acquired in the following 30 days, then shares from your general holding at a weighted average cost. Getting this wrong distorts the gain, so pull together contract notes, bank statements, and share certificates before you start.
Business Asset Disposal Relief
Business Asset Disposal Relief (BADR) cuts the rate for qualifying shareholders selling shares in a trading company. For disposals on or after 6 April 2026, the BADR rate is 18%. That matches the standard basic-rate CGT rate but still saves higher-rate taxpayers who would otherwise pay 24%.8GOV.UK. Capital Gains Manual – CG64174 – Business Asset Disposal Relief: Rates from April 2025
To qualify, all of the following must be true throughout a continuous two-year period ending on the date of disposal:
- You hold at least 5% of the company’s ordinary share capital and 5% of the voting rights.
- You are entitled to at least 5% of distributable profits and 5% of assets on a winding up, or 5% of the proceeds if the entire ordinary share capital were sold.
- You are an employee or officer, such as a director. There is no minimum-hours rule, so part-time roles count.
- The company is a trading company or the holding company of a trading group throughout the period.
A lifetime cap of £1 million in qualifying gains applies per individual.9Legislation.gov.uk. Taxation of Chargeable Gains Act 1992 – Section 169H Once you have used it, further gains are taxed at standard rates. Missing even one condition, such as dropping below 5% after a share issue or stepping down as a director too early, disqualifies the whole claim. Sorting out shareholdings and roles well before an exit is the single biggest thing an owner can do to protect the relief.
Reporting and Paying the Tax
Individuals report share gains through Self Assessment. The online return for the 2026–27 tax year is due by 31 January 2028; the paper deadline is earlier, on 31 October.10GOV.UK. Self Assessment Tax Returns: Deadlines Payment is due on the same 31 January date. Unlike gains on residential property, share disposals do not have to be reported within 60 days of completion.
If the gain pushes your total tax bill well beyond what PAYE covers, you may need to adjust payments on account to avoid an underpayment charge.
On the company side, chargeable gains go on the corporation tax return (CT600) for the accounting period in which the disposal happened, and any extra tax is paid on the company’s normal schedule.
What Late Filing Costs
Missing the Self Assessment deadline brings an automatic £100 penalty, even if no tax is owed. After three months, daily £10 penalties start, capped at £900. After six months, a further penalty of the greater of 5% of the tax due or £300 applies, and the same charge is added again at twelve months.11GOV.UK. Self Assessment Tax Returns: Penalties
Interest runs on top. Since April 2025, HMRC’s late-payment interest rate has been the Bank of England base rate plus 4%, up from base plus 2.5%, and it compounds daily. On a large share gain, a few months of delay can carve a real slice off the proceeds. Filing and paying on time is the simple protection.