{"id":186567,"date":"2024-03-09T14:54:17","date_gmt":"2024-03-09T14:54:17","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=186567"},"modified":"2024-03-09T14:54:19","modified_gmt":"2024-03-09T14:54:19","slug":"taxes-selling-business-asset-sale","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/startups\/taxes-selling-business-asset-sale\/","title":{"rendered":"What Taxes Apply When Selling My Business in an Asset Sale?"},"content":{"rendered":"\n

Selling a business can be complex and stressful, especially when you try to understand the tax implications. You must be aware of your tax liabilities. Planning ahead is a good idea to ensure you are prepared and avoid surprises. This article will explain the tax implications of selling your business in an asset sale<\/a>. <\/p>\n\n\n\n

Tax and Your Business\u2019s Structure<\/h2>\n\n\n\n

The amount of tax you owe and how you will pay it is affected by the structure of your business. The following table demonstrates how your business\u2019s structure can affect the type of tax you pay upon sale. <\/p>\n\n\n\n

Company Structure <\/strong><\/td>Tax Implications<\/strong><\/td><\/tr>
Sole Trader<\/td>If you operate as a sole trader, you must pay capital gains tax on your profit when you sell your business. <\/td><\/tr>
Partnership <\/td>Similarly to the sole trader structure, if your business is a partnership, you must also pay capital gains tax on the profit made when you sell. <\/td><\/tr>
Limited Company <\/td>If you operate your business as a limited company, you will need to pay corporation tax on any profits made from the sale of your business.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Capital Gains Tax <\/h2>\n\n\n\n

You may need to pay capital gains tax (CGT) on the profits made from selling or disposing of all or part of a business asset. You can calculate what you owe based on the difference between the amount you paid for the asset and the amount you sold it for. <\/p>\n\n\n\n

For example, if you initially bought your business for \u00a3100,000 and then sold it for \u00a3250,000, the difference is \u00a3150,000. This means you have \u2018gained\u2019 \u00a3150,000 in profit. Higher-rate earners pay CGT at a rate of 20% of this amount, so \u00a330,000 in this case. Alternatively, if you sold a business asset for a loss, you will use the asset’s market value at the time of sale to calculate the amount of CGT you owe. Your tax will also depend on any allowances and reliefs you claim. <\/p>\n\n\n\n

There are also forms of tax relief available. One form of tax relief is Business Asset Disposal Relief (BADR), previously known as entrepreneurs\u2019 relief. This lifetime relief limit of \u00a31 million is available under particular circumstances. To qualify for relief, both of the following must apply for at least two years up to the date you sell your business<\/a>: <\/p>\n\n\n\n