CGT on share sales

Tax on sale of private company shares

If you sell your shares, Capital Gains Tax (CGT) may be payable on the gain. The timing and amount of the tax liability depend on the terms of the transaction, including whether the consideration is paid upfront or deferred. Consideration may take the form of:

• shares in the purchasing company (a share for share exchange);
• deferred consideration under an earn-out arrangement; and/or
• loan notes.

Each form of consideration can have different tax implications. We look at these in turn, starting with how the capital gain is calculated and when CGT is payable.

How will the capital gain be calculated in the UK?

An individual selling shares will generally be liable to CGT on the gain arising from the disposal, subject to any applicable reliefs and exemptions.

The gain is generally calculated by deducting the following from the disposal proceeds:

• the acquisition cost (the base cost);
• allowable incidental costs of acquisition and disposal, such as legal fees; and
• any allowable capital losses available for offset.

CGT is payable on the taxable gain after deducting any available annual exempt amount and applying relevant reliefs.

For disposals from 6 April 2026, the standard CGT rates for individuals are 18% for gains falling within the basic-rate band and 24% for gains above it. Business Asset Disposal Relief (BADR), if available, applies at 18%. For disposals between 6 April 2025 and 5 April 2026, the BADR rate was 14%. For earlier disposals, the applicable rates depend on the tax year and whether relief was available.

When is the Capital Gain Tax payable?

For most share disposals by individuals, CGT is payable by 31 January following the end of the tax year in which the disposal occurs. For example, CGT on a disposal in the 2025/26 tax year is generally payable by 31 January 2027. Special rules may apply depending on the transaction and the taxpayer’s circumstances.

CGT liability for Consideration Shares

Where some or all of the consideration for a share sale consists of shares in the buyer company (the Buyer), the tax treatment depends on the structure of the transaction.

A qualifying share-for-share exchange may benefit from the share reorganisation rules, meaning that the exchange does not trigger an immediate CGT charge and the gain is effectively deferred until the replacement shares are disposed of. These rules are subject to statutory conditions, including requirements concerning the nature of the exchange and the control acquired by the Buyer.

Where the rules apply, it may be possible to elect out of the usual treatment in certain circumstances. If BADR is available and the relevant conditions are met, the timing of that election should be considered carefully. The availability and effect of an election depend on the transaction and applicable legislation.

Why pay CGT sooner rather than later?

The advantage of paying CGT earlier and claiming BADR may be that:

• the rules relating to BADR may change in the future; and
• you may no longer qualify for BADR on a later disposal if you cannot satisfy the relevant conditions.

CGT on Deferred Consideration

The CGT liability for deferred consideration payable under an earn-out or similar arrangement depends on whether the amount is known or ascertainable, or unascertainable. Deferred consideration may be paid in cash, shares or loan notes.

Known or Ascertainable Deferred Consideration

Where the amount is known or ascertainable, it will generally be included in the calculation of the disposal proceeds, even if payment is received later.

If the full amount is not subsequently received, relief may be available, subject to the applicable conditions. Including the deferred consideration in the initial calculation may also affect whether BADR is available.

Unascertainable Deferred Consideration

Where the amount depends on future events, such as future profits, the right to receive the consideration is generally valued and treated as an asset in its own right. When further consideration is received, a separate CGT calculation may be required.

The availability of BADR or other relief will depend on the relevant rules and circumstances.

CGT liability for Loan Notes

The CGT treatment of loan notes depends on their terms and whether they qualify as qualifying corporate bonds (QCBs). A qualifying exchange may defer the gain, while non-qualifying loan notes may be treated differently. Interest received on loan notes is generally subject to Income Tax rather than CGT.