Will you get the lower tax rate when you sell?
When you sell shares in your company, profit up to a £1 million lifetime limit can be taxed at 18% instead of 24%, if every test has been met for the two years before the sale. We check each test, flag spare cash that could put it at risk and show the tax either way.
Your answer
Choose which fits you and enter the date you plan to sell to see the checks.
About this calculator
For company owners who work in the business and plan to sell shares, and for outside investors who paid the company for new shares. The lower rate is Business Asset Disposal Relief for owners (Taxation of Chargeable Gains Act 1992, sections 169H to 169S) and Investors' Relief for outside investors (sections 169VA to 169VY). Both tax up to £1 million of lifetime profit at 18%.
You type the answers: we don't look anything up at Companies House or read your accounts. Each test ends as met, not met or not checked. The spare-cash level of 20% is a guide HMRC uses (Capital Gains Manual CG64090), not a rule in the law, so going over it shows as a risk, not a fail. We don't ask how much time goes on investments, and we take your profit and value rights from the same date as your shares.
A sale to an employee ownership trust can't get this relief: half the gain is taxed instead (section 236H). This calculator is for other sales. It doesn't cover selling the business's assets rather than shares, a company that has stopped trading, partnerships, trusts or share reorganisations.
What happens to your answers
We don’t keep them. Your answers go to our server to do the sums and aren’t stored or logged. If you copy a link to your answers, they’re in the link itself, so only share it with people you trust.
How it’s worked out
The rules ask for the same things, without a break, for the two years up to the day you sell: you're a director or employee, you own at least 5% of the shares and the votes, your shares give you at least 5% of the profits and value (or of the sale price), and the company is mainly trading. For shares from an EMI option, the option must be granted at least two years before the sale instead of the 5% tests. Outside investors need new shares paid for in cash, issued on or after 17 March 2016 and held for three years, and must not have worked for the company.
For each time test we add the years to your start date: that day must be on or before the sale date. If it isn't, we show the first day you could sell and pass. For spare cash, we divide the cash and investments the business doesn't need by everything the company owns and compare it with 20%, and show what you'd need to spend or take out to get under it.
With a profit, we take off the £3,000 tax-free amount and tax the part inside your lifetime limit at 18%, the rest at 18% or 24% depending on your other income. In the example, a £1.5 million profit for a higher-rate taxpayer with spare cash at 15% passes all five tests: tax is £299,280 with the lower rate and £359,280 without, a saving of £60,000. You claim the relief on your tax return by the 31 January almost two years after the tax year of the sale.
Worked example
Yes: on your answers you pass all 5 tests for the lower 18% rate (Business Asset Disposal Relief).
2026/27 rates · owner who works in the business · your own answers to the tests · other income £80,000 · none of the lifetime limit used · not a sale to an employee ownership trust
| You have been a director or employee for the full 2 years | Met |
|---|---|
| You own at least 5% of the shares and the votes for the full 2 years | Met |
| Your shares give you at least 5% of the profits and the value, or of the sale price, for the full 2 years | Met |
| The company has been mainly trading for the full 2 years | Met |
| Spare cash and investments are no more than 20% of what the company owns (a rough guide) | Met |
| The lower rate (Business Asset Disposal Relief) | 18% |
| Lifetime limit | £1,000,000 |
| Lifetime limit left | £1,000,000 |
| Your profit on the sale | £1,500,000 |
| Less the tax-free amount for gains | − £3,000 |
| Basic-rate band left after your other income | £0 |
| Tax with no lower rate (18% in the basic-rate band, 24% above) | £359,280 |
| Part of the profit at the lower rate (it uses the basic-rate band first) | £1,000,000 |
| Tax if every test is passed | £299,280 |
| Tax saved if every test is passed | £60,000 |
Worked out using the tests in the Taxation of Chargeable Gains Act 1992 (sections 169I and 169S for Business Asset Disposal Relief) and HMRC's rates for the 2026/27 tax year. The 20% level for spare cash is HMRC guidance (Capital Gains Manual CG64090), not law: that part is a rough guide. Not legal or tax advice.
Questions people ask
Can I fix a cash pile just before I sell?
Not always. The company must be mainly trading for the whole two years before the sale, so clearing the cash only helps the time after it's done. We can tell you what's still open to you and what it would cost in tax.
Is 20% a hard line?
No. It's a guide HMRC uses, not a number in the law. Being under it doesn't guarantee the lower rate, and being a little over doesn't always lose it. HMRC looks at the whole business, so treat it as a warning light.
Does selling to an employee ownership trust get the lower rate?
No. Since the 2025 Budget, half the gain on a sale to an employee ownership trust is taxed at the normal rates and the other half is put off, and Business Asset Disposal Relief can't be claimed on it (Taxation of Chargeable Gains Act 1992, section 236H).
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