1. What Is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit when you sell (or 'dispose of') something (an 'asset') that's increased in value. For business sales, it's the tax on the gain you make from selling your business assets.

2. How Does The Calculator Work?

The calculator uses the capital gains tax formula:

Where:

• \( Sale\ Price \) — The amount you receive for selling the business (GBP)
• \( Basis \) — Your original investment or acquisition cost (GBP)
• \( Capital\ Gains\ Rate \) — The applicable tax rate (20% for long-term UK 2025)

Explanation: The calculation determines your capital gain (profit) and applies the relevant tax rate to calculate your tax liability.

3. Importance Of Tax Calculation

Details: Accurate capital gains tax calculation is crucial for business sellers to understand their tax obligations, plan for tax payments, and make informed decisions about the timing and structure of business sales.

4. Using The Calculator

Tips: Enter the sale price in GBP, your original basis (acquisition cost) in GBP, and the applicable capital gains rate. The calculator assumes long-term capital gains tax rate of 20% for UK 2025 by default.

5. Frequently Asked Questions (FAQ)

Q1: What qualifies as "basis" for a business sale?
A: Basis typically includes your original purchase price, plus any capital improvements, legal fees, and other costs directly related to acquiring and improving the business.

Q2: Are there any exemptions or reliefs available?
A: Yes, Business Asset Disposal Relief (formerly Entrepreneurs' Relief) may reduce the rate to 10% on qualifying gains up to £1 million. Other reliefs may also apply depending on circumstances.

Q3: When is capital gains tax due after selling a business?
A: For UK residents, CGT on business disposals is typically due by January 31st following the end of the tax year in which the sale occurred.

Q4: What if I sell only part of my business?
A: The same calculation applies, but you'll need to determine the appropriate basis allocation for the portion being sold.

Q5: Are there different rates for different types of assets?
A: Yes, different assets within a business (goodwill, property, equipment) may have different tax treatments. Professional advice is recommended for complex situations.