Smart to learn the landscape early — the structure you keep now can genuinely affect the tax bill later. Here are the general principles.
What each sale means
In a share sale, you sell your shares and the buyer takes over the whole company: its assets, contracts, staff, debts and history. In an asset sale, the company stays with you and sells its individual assets — equipment, stock, premises, goodwill, the customer list — to the buyer.
Share sale: how you are taxed
You pay Capital Gains Tax personally on the gain (sale price minus what you paid for the shares, after the £3,000 annual exempt amount). If you qualify for Business Asset Disposal Relief — broadly, you hold at least 5% of the shares and voting rights, you are an officer or employee, and it is a trading company for 2 years up to the sale — you pay 18% on qualifying gains up to the £1m lifetime limit for disposals from 6 April 2026 (see gov.uk/business-asset-disposal-relief). Gains above the relief are taxed at 18% or 24% depending on your income tax band. One tax charge, on you.
Asset sale: who pays
Both, potentially. First, the company pays Corporation Tax (19% or 25% depending on profit levels) on the gains it makes selling its assets. Then, to get that cash into your hands, you have to extract it — via dividends (taxed as income at 10.75%/35.75%/39.35% above the £500 allowance), salary, or by winding the company up and taking a capital distribution (which can itself qualify for BADR in the right circumstances). So an asset sale often means tax twice: once inside the company, once on extraction. It is still done all the time, but it needs modelling.
Which route is usually better, and what drives the choice
Sellers usually prefer share sales: a single CGT hit, often at BADR rates, and a clean exit. Buyers usually prefer asset sales: they get a stepped-up base cost in the assets (useful for capital allowances), and they leave the company's historic liabilities — old tax issues, disputes, warranties — behind with you. That tension is often reflected in the price: a buyer may pay less for assets, or accept a lower price in a share deal to take on the risk. Commercially, the buyer's preference and the negotiation usually decide, but knowing the tax shape of each lets you price accordingly.
Keeping both options open now
A few things help whatever you do later: keep a clean record of what you paid for your shares (subscription documents); keep the company genuinely trading, since BADR needs trading-company status; maintain the 5% holding and 2-year conditions; avoid letting non-trading investments build up inside the company; and keep proper asset registers and periodic valuations of goodwill. When the time comes, take specialist advice well before any heads of terms are signed — the tax position is much harder to fix afterwards.
