--- title: "What is CGT for businesses? | 2026/27 UK Guide" description: "To accurately answer *what is CGT for businesses*, practitioners must first identify the legal structure of the business making the disposal. The UK tax system enforces a strict dividing line: sole traders, partners, and trustees pay Capital Gains Tax (CGT) on…" url: "https://www.accountingfirms.co.uk/knowledge-bank/what-is-cgt-for-businesses/" updated: "2026-08-11" category: Limited Company --- # What is CGT for businesses? | 2026/27 UK Guide To accurately answer *what is CGT for businesses*, practitioners must first identify the legal structure of the business making the disposal. The UK tax system enforces a strict dividing line: sole traders, partners, and trustees pay Capital Gains Tax (CGT) on business asset disposals, whereas limited companies do not pay CGT at all. For the 2026/27 tax year, the Finance Act 2025 significantly overhauled the taxation of business gains, stripping away historical advantages and unifying rates. ## The Corporate Divide: Corporation Tax on Chargeable Gains If your client operates through a limited company, they are entirely excluded from the Capital Gains Tax regime. Section 4 of the Corporation Tax Act 2009 (CTA 2009) and section 1(2) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) state explicitly that capital gains tax is not charged on gains accruing to a company. Instead, [companies pay Corporation Tax](https://www.accountingfirms.co.uk/blog/tell-hmrc-that-your-company-is-dormant/) on their chargeable gains.  A company's net chargeable gains form part of its "total profits" for its accounting period. For the 2026/27 financial year, the Corporation Tax rates on these gains are determined by the [company's profitability](https://www.accountingfirms.co.uk/blog/loans-to-shareholders-rules-an-unexpected-twist/): - **Small Profits Rate:** Companies with augmented profits up to £50,000 pay **19%**. - **Main Rate:** Companies with profits exceeding £250,000 pay the main rate of **25%**. - Marginal relief applies for profits falling between these thresholds. Crucially, unlike individuals, companies receive no Annual Exempt Amount (AEA) to offset their chargeable gains. ## Sole Traders and Partnerships: Individual CGT Rates If your client operates as a sole trader or as a partner in a partnership, they are charged to Capital Gains Tax as individuals under section 1(1) of TCGA 1992.  For partnerships, the firm itself does not pay the tax; instead, each partner is assessed individually on their share of the business gain. Before applying the tax rates, the individual deducts the Annual Exempt Amount, which is permanently fixed at **£3,000** for the 2026/27 tax year. For disposals in the 2026/27 tax year, section 7 of the Finance Act 2025 amends section 1H of TCGA 1992 to apply the following main CGT rates to business assets: - **Basic Rate Taxpayers:** You pay **18%** on gains falling within your unused basic rate income tax band. - **Higher and Additional Rate Taxpayers:** You pay **24%** on any gains that exceed the basic rate band. ## Business Asset Disposal Relief (BADR) and Investors' Relief Historically, business owners relied on [Business Asset Disposal Relief](https://www.accountingfirms.co.uk/blog/cgt-advantages-of-furnished-holiday-lettings/) (BADR) to secure a preferential 10% rate on the sale of their trading business. For the 2026/27 tax year, this tax advantage is heavily diluted. **The New 18% Rate (April 2026 Onwards):** Section 8 of the Finance Act 2025 amends section 169N of TCGA 1992. For qualifying disposals made on or after 6 April 2026, the rate of CGT for BADR increases to **18%**. > "In section 169N(3) of TCGA 1992... for “14%” substitute “18%”... The amendments made by subsections (4) and (5) have effect in relation to disposals made on or after 6 April 2026." **Investors' Relief (IR):** Similarly, section 9 of the Finance Act 2025 amends section 169VC of TCGA 1992 to increase the Investors' Relief rate to **18%** for disposals of qualifying unlisted trading company shares made on or after 6 April 2026. **Lifetime Limits:** The maximum lifetime limit of qualifying gains against which an individual can claim BADR is strictly capped at **£1 million**.  Furthermore, for disposals made on or after 30 October 2024, the lifetime limit for Investors' Relief was also drastically reduced to **£1 million** (down from £10 million). ## Deferral Reliefs for Unincorporated Businesses When an individual or partnership [sells a business asset](https://www.accountingfirms.co.uk/blog/selling-up-which-route/), they can often defer the CGT liability using specific statutory mechanisms: - **Business Asset Rollover Relief (s 152):** Under section 152 of TCGA 1992, if a trader sells a qualifying business asset and reinvests the proceeds into a new qualifying business asset, they can roll the gain over into the base cost of the new asset, deferring the tax until the replacement asset is eventually sold. - **Incorporation Relief (s 162):** If a sole trader or partnership transfers their business as a going concern (including all assets other than cash) to a limited company wholly or partly in exchange for shares, section 162 of TCGA 1992 automatically postpones the CGT charge.  The gain is rolled into the base cost of the new shares. - **Gift Hold-over Relief (s 165):** Under section 165 of TCGA 1992, an individual can give a qualifying business asset to another person without triggering an immediate CGT charge. The gain is held over and deducted from the donee’s acquisition cost, transferring the future tax burden to the recipient. ## Tax-Free Corporate Disposals: Substantial Shareholdings Exemption (SSE) If a limited company sells a trading subsidiary or a significant stake in another business, it can frequently execute the disposal entirely tax-free using the Substantial Shareholdings Exemption (SSE). Schedule 7AC of TCGA 1992 dictates that a gain accruing to a company on the disposal of shares is not a chargeable gain if the investing company holds a "substantial shareholding".  To qualify, the investing company must hold at least 10% of the investee company's ordinary share capital (and be entitled to at least 10% of the profits and assets) for a continuous period of at least 12 months. ## Reporting and Compliance The mechanism for reporting business gains depends on the entity: - **Individuals and Partners:** You must declare the business gains, deduct the £3,000 AEA, and claim any reliefs (like BADR or Rollover Relief) via the Capital Gains pages of the annual [Self Assessment tax return](https://www.accountingfirms.co.uk/knowledge-bank/what-should-i-do-if-ive-stopped-being-self-employed/). - **Companies:** You report the chargeable gains within the company's total profits on the statutory Company Tax Return (CT600), paying the resulting Corporation Tax in alignment with the company's standard accounting period deadlines. ## Summary of Business Capital Gains (2026/27) | Feature | Unincorporated (Individuals/Partners) | Incorporated (Limited Companies) | Statutory Authority | | --- | --- | --- | --- | | **Applicable Tax** | Capital Gains Tax (CGT). | Corporation Tax (CT). | TCGA 1992, s 1 & 2 / CTA 2009, s 4 | | **Main Tax Rates** | 18% (Basic) / 24% (Higher). | 19% (Small Profits) to 25% (Main). | FA 2025, s 7  / HMRC CTM03910 | | **Tax-Free Allowance** | £3,000 (Annual Exempt Amount). | Nil (No AEA for companies). | TCGA 1992, s 1K | | **BADR / IR Rate** | 18% (from 6 April 2026). | N/A. | FA 2025, s 8 & s 9 | | **Lifetime Limit** | £1,000,000 per relief. | N/A. | HMRC CG10245 | | **Share Disposal Relief** | N/A (BADR may apply). | 100% Tax-Free (SSE - Sch 7AC). | TCGA 1992, Sch 7AC | | **Rollover Relief (s152)** | Available on trading asset replacement. | Available on trading asset replacement. | TCGA 1992, s 152 | | **Incorporation (s162)** | Rolls gain into share cost. | N/A. | TCGA 1992, s 162 | | **Gift Hold-over (s165)** | Defers gain to the donee. | N/A. | TCGA 1992, s 165 | *Next steps for research: Verify if the company disposal meets the specific "trading company" or "trading group" definitions under Schedule 7AC to ensure the Substantial Shareholdings Exemption applies. Review the anti-forestalling provisions under Finance Act 2025 Schedule 2 to determine if any unconditional contracts exchanged prior to 30 October 2024 lock in the older 10% or 14% BADR rates.*