Do Companies Pay Capital Gains Tax?
- Adil Akhtar
- 2 days ago
- 15 min read
The Audio Summary of the Key Points of the Article:
Understanding Capital Gains Tax for UK Companies: The Basics
Right, let’s dive straight into the big question: Do companies pay capital gains tax in the UK? The short answer is no, companies don’t pay Capital Gains Tax (CGT) as individuals do. Instead, they’re subject to Corporation Tax on any profits made from disposing of assets. This distinction is crucial for business owners, and I’m going to unpack it in a way that makes sense, whether you’re running a small startup or a larger enterprise. Let’s break down what this means, how it works, and why it matters for UK taxpayers and business owners in 2025.
What Exactly Counts as a “Gain” for Companies?
Now, when a company sells or disposes of an asset—like property, equipment, or shares in another business—it might make a profit, or in tax terms, a “chargeable gain.” Unlike individuals who pay CGT on such gains, companies roll these profits into their overall taxable profits and pay Corporation Tax. For the 2025/26 tax year, the Corporation Tax rate is 25% for companies with profits over £250,000, or 19% for those with profits up to £50,000, with marginal relief for profits in between. These rates apply to all taxable profits, including gains from asset disposals, as confirmed by HMRC guidance.
How Are Gains Calculated for Companies?
Let’s get practical here. Calculating a chargeable gain for a company isn’t wildly different from how individuals calculate CGT, but there are some key twists. You start with the disposal proceeds (what you sold the asset for) and subtract the cost (what you paid for it, plus allowable expenses like legal fees or improvements). Sounds simple, right? But here’s where it gets interesting: companies can still claim indexation allowance for assets bought before 31 December 2017. This adjusts the original cost for inflation up to that date, reducing the taxable gain. For example, if your company bought a property in 2010 for £100,000 and sold it in 2025 for £200,000, indexation could shave off a chunk of that gain, depending on inflation rates published by HMRC.
A Quick Example to Make It Clear
Picture this: your company, let’s call it Bramblewick Ltd., buys a delivery van for £20,000 in 2020. In 2025, you sell it for £35,000 after spending £2,000 on a respray and £1,000 on legal fees. The gain is calculated as:
Sale price: £35,000
Less cost: £20,000
Less allowable expenses: £2,000 (respray) + £1,000 (legal fees)
Chargeable gain: £12,000
This £12,000 gets added to Bramblewick Ltd.’s taxable profits and is taxed at the Corporation Tax rate—say, 25% if your profits are over £250,000. That’s £3,000 in tax. No separate CGT, just part of the company’s overall tax bill.
Table: Corporation Tax Rates for 2025/26
Profit Level | Corporation Tax Rate | Notes |
Up to £50,000 | 19% | Small profits rate for smaller companies. |
£50,001–£250,000 | 19%–25% | Marginal relief applies, gradually increasing the effective rate. |
Over £250,000 | 25% | Main rate for larger companies. |
Source: HMRC, 2025/26 tax year
Why Don’t Companies Pay CGT?
Now, you might be wondering why companies get this special treatment. It’s not about giving businesses a free pass—it’s about streamlining the tax system. CGT is designed for individuals and trusts, with rates of 18% or 24% (or 32% for carried interest) in 2025/26, depending on your income tax band. Companies, on the other hand, operate under a different framework where all profits—whether from trading, investments, or asset sales—are bundled together under Corporation Tax. This avoids double taxation and simplifies reporting, though it doesn’t necessarily mean companies pay less tax overall.
Assets That Trigger Chargeable Gains
So, what kinds of assets might land your company with a chargeable gain? Pretty much anything you own that increases in value and gets disposed of. Common examples include:
Property: Office buildings, warehouses, or land.
Equipment: Machinery, vehicles, or tech gear.
Shares: Investments in other companies.
Intangible assets: Things like patents or trademarks.
But here’s a heads-up: not every disposal triggers a tax. Gifts to charities or transfers between spouse-owned companies are often exempt, as are assets with a lifespan under 50 years (known as “wasting assets”). Always check with an accountant to confirm what’s taxable.
Special Rules for Property Disposals
Be careful if your company deals in property! If you’re selling UK land or buildings, there’s a specific wrinkle. Since April 2019, companies (even non-UK resident ones) pay Corporation Tax on gains from UK property disposals. For non-resident companies, this applies only to gains accrued from April 2019 onward, and they might need to file a special return within 60 days of the sale. For example, if Cuthbert Enterprises, a foreign company, sells a London warehouse in 2025, they’ll need to report the gain to HMRC pronto.
Reliefs and Exemptions to Save You Money
Now, here’s where it gets juicy: companies can reduce their tax bill with reliefs. One big one is Business Asset Rollover Relief, which lets you defer tax if you reinvest the proceeds from selling one business asset into another. Say Widdershins Ltd. sells an old factory for a £50,000 gain but buys a new one for £60,000. They could defer the tax on that gain until the new factory is sold. Another gem is the Substantial Shareholding Exemption (SSE), which can exempt gains on selling shares in another company if you’ve held at least 10% of the shares for 12 months. These reliefs can be game-changers, so don’t sleep on them.
Why This Matters for Business Owners
If you’re a business owner, understanding that your company pays Corporation Tax, not CGT, is critical for planning. It affects how you structure disposals, reinvest profits, or even wind down your business. For instance, if you’re selling your company’s assets to retire, the tax hit will depend on your overall profits and the Corporation Tax rate, not the CGT rates of 18% or 24% that apply to individuals. This could mean a higher or lower tax bill, depending on your situation. Always run the numbers with a tax adviser to avoid surprises.
Real-Life Case Study: The 2024 Asset Sale
Let’s look at a real-world scenario. In 2024, Puddleglum Properties Ltd., a small UK company, sold a commercial unit for £300,000 that it bought in 2015 for £150,000. After allowable expenses (legal fees and stamp duty) of £10,000, their chargeable gain was £140,000. With annual profits of £200,000, they fell into the marginal relief band for Corporation Tax. Using HMRC’s marginal relief calculator, their effective tax rate on the gain was about 22%, resulting in a tax bill of £30,800. Had this been an individual sale, CGT at 24% (assuming higher-rate taxpayer status) would’ve been £33,600 after the £3,000 annual exempt amount. The company structure saved them a bit, but only because of careful planning.
Practical Strategies and Pitfalls for UK Companies Managing Gains
Now that you’ve got the basics of how companies in the UK are taxed on their gains—not through Capital Gains Tax (CGT) but via Corporation Tax—let’s get into the nitty-gritty. This part is all about helping you, as a business owner or taxpayer, navigate the system with practical tips, avoid common traps, and make the most of available reliefs. I’ll also throw in some real-world scenarios and a step-by-step guide to keep things actionable. Let’s roll up our sleeves and dig in.
Planning Asset Disposals Like a Pro
So, you’re thinking about selling a company asset—maybe a property or some shares. The first thing to do is plan strategically. Timing can make a huge difference. For example, if your company’s profits are hovering near the £50,000 threshold for the 2025/26 tax year, selling an asset that pushes you into the 25% Corporation Tax bracket could sting. Consider spreading disposals over multiple tax years to stay in the 19% small profits rate or the marginal relief zone. A company like Tattershall Trading Ltd. might sell half its equipment in March 2025 and the rest in April 2025 to keep profits manageable.
Step-by-Step Guide: Calculating Your Company’s Chargeable Gain
Right, let’s break this down into a clear process you can follow when your company sells an asset. This guide will help you estimate the tax impact and avoid nasty surprises:
Identify the Disposal Proceeds: Note the sale price or market value if you’re gifting the asset. For example, if you sell a warehouse for £500,000, that’s your starting point.
Subtract the Original Cost: Include what you paid for the asset, plus any acquisition costs like legal fees. Say the warehouse cost £300,000 with £5,000 in fees.
Add Improvement Costs: Include expenses that enhanced the asset’s value, like renovations. If you spent £20,000 upgrading the warehouse, add that.
Apply Indexation Allowance (if applicable): For assets bought before 31 December 2017, use HMRC’s indexation factors to adjust for inflation. Check the latest tables on GOV.UK.
Deduct Disposal Costs: Subtract costs like legal fees or agent commissions. If you paid £10,000 to sell the warehouse, deduct that.
Calculate the Gain: Sale price (£500,000) minus cost (£300,000 + £5,000 + £20,000) minus disposal costs (£10,000) = £165,000 gain.
Add to Taxable Profits: This gain gets added to your company’s profits for the year and taxed at the Corporation Tax rate (19%–25% for 2025/26).
Check for Reliefs: Explore options like Business Asset Rollover Relief or Substantial Shareholding Exemption to reduce or defer the tax.
Always double-check your numbers with an accountant, as small errors can lead to big penalties.
Table: Common Allowable Costs for Chargeable Gains
Cost Type | Description | Example |
Acquisition Costs | Purchase price plus fees (e.g., legal, stamp duty) | £300,000 + £5,000 fees |
Improvement Costs | Capital expenses that increase asset value | £20,000 for property upgrades |
Disposal Costs | Fees for selling (e.g., agent fees, legal costs) | £10,000 for sale commissions |
Incidental Costs | Other expenses directly tied to the asset | £2,000 for valuation surveys |
Source: HMRC Capital Gains Manual, 2025
Watch Out for Common Pitfalls
Be careful! One of the biggest mistakes companies make is assuming all disposals are taxed the same way. For instance, transferring assets between related companies (like a parent and subsidiary) can trigger unexpected tax liabilities unless you claim group relief. In 2023, Grimble & Sons Ltd. transferred a factory to its sister company without electing for group relief, landing a £40,000 Corporation Tax bill on a deemed market-value gain. HMRC’s rules are strict—always file the necessary forms, like a joint election for group transfers, to avoid this.
Another trap is forgetting to report property disposals. Since 2019, companies must report UK property sales to HMRC within 60 days, even if no tax is due. Miss this, and you could face penalties starting at £100, rising to £300 for late filings, per HMRC’s 2025 guidance. Set a calendar reminder or use software like Xero to track deadlines.
Maximising Reliefs to Slash Your Tax Bill
Now, let’s talk about saving money. Reliefs are your best friend when it comes to reducing Corporation Tax on gains. Beyond the Business Asset Rollover Relief and Substantial Shareholding Exemption mentioned earlier, consider restructuring reliefs. If you’re reorganising your company—say, merging two subsidiaries—you might qualify for relief that treats the transfer as tax-neutral. In 2024, Pevensie Partners Ltd. merged two subsidiaries and deferred £75,000 in tax by claiming reconstruction relief, reinvesting the savings into new equipment.
Another lesser-known relief is for negligible value claims. If an asset (like shares in a failed venture) becomes worthless, you can claim a loss to offset other gains. For example, if Natterjack Ventures Ltd. invested £50,000 in a startup that went bust in 2025, they could claim a £50,000 loss, reducing their taxable profits. Check HMRC’s guidance on GOV.UK for how to make this claim.
Real-Life Case Study: The 2025 Share Sale
Here’s a fresh example from 2025. Rookthwaite Retail Ltd., a medium-sized UK company, sold a 15% stake in a supplier for £200,000, originally bought for £80,000 in 2022. With £5,000 in legal fees, their chargeable gain was £115,000. They qualified for the Substantial Shareholding Exemption because they held the shares for over 12 months, meaning no tax was due on the gain. This saved them £28,750 (at a 25% Corporation Tax rate). Without the exemption, their tax bill would’ve eaten into their expansion budget. The lesson? Always check if your share disposals qualify for SSE before assuming a tax hit.
Tax Implications for Small vs. Large Companies
Here’s something to chew on: the size of your company matters. Small businesses with profits under £50,000 benefit from the 19% Corporation Tax rate, making asset disposals less painful. Larger companies, like those with profits over £250,000, face the full 25% rate. If you’re a small business owner, consider keeping profits low in high-gain years by reinvesting or claiming deductions. For larger firms, strategic reliefs like SSE or rollover relief are critical to managing tax exposure. In 2024, a small café chain, Bumblebee Brews Ltd., sold an old shop for a £30,000 gain and paid just £5,700 in tax at 19%, while a larger competitor faced a 25% rate on a similar sale, costing them £7,500.
Dealing with HMRC: Reporting and Compliance
None of us loves paperwork, but getting it right with HMRC is non-negotiable. Companies must report chargeable gains in their Corporation Tax return (CT600), filed within nine months of the accounting period’s end. For property disposals, the 60-day reporting rule is separate and applies even if you’re claiming a relief. Use HMRC’s online portal to file, and keep records of all calculations, receipts, and valuations for at least six years. In 2023, Hobbledehoy Holdings Ltd. was fined £1,200 for incomplete records during an HMRC audit, so don’t skimp on documentation.
Why This Matters for Your Bottom Line
Now, consider this: every pound you save on tax is a pound you can reinvest in your business. Whether it’s hiring staff, upgrading equipment, or expanding your market, understanding how to manage gains can free up cash flow. Small businesses, in particular, can use reliefs and careful timing to stay in lower tax brackets, while larger firms need to leverage exemptions like SSE to compete. Always consult a tax adviser to tailor these strategies to your specific circumstances—generic advice won’t cut it for complex disposals.
Key Takeaways for UK Companies and Taxpayers on Managing Gains
Right, let’s wrap this up with a clear, no-nonsense summary of the most critical points you need to know about how companies handle gains in the UK. Whether you’re a small business owner or running a larger enterprise, these takeaways will help you stay on top of your tax obligations and make smart decisions. Each point is distilled into a single sentence for clarity, keeping things practical and focused for UK taxpayers and business owners in 2025.
Summary of the Most Important Points
Companies in the UK do not pay Capital Gains Tax but instead include profits from asset disposals in their taxable profits, subject to Corporation Tax at 19% for profits up to £50,000 or 25% for profits over £250,000 in the 2025/26 tax year.
Chargeable gains are calculated by subtracting the original cost, allowable expenses, and any indexation allowance (for assets bought before 31 December 2017) from the disposal proceeds.
Common assets triggering chargeable gains include property, equipment, shares, and intangible assets like patents, but exemptions apply for gifts to charities or wasting assets with a lifespan under 50 years.
UK property disposals by companies, including non-resident ones, must be reported to HMRC within 60 days, with gains taxed under Corporation Tax, as mandated since April 2019.
Business Asset Rollover Relief allows companies to defer tax by reinvesting proceeds from one business asset into another, preserving cash flow for growth.
The Substantial Shareholding Exemption can fully exempt gains on share disposals if the company held at least 10% of the shares for 12 months, as seen in cases like Rookthwaite Retail Ltd.’s 2025 sale.
Strategic timing of asset disposals can keep profits within lower Corporation Tax brackets, especially for small businesses under the £50,000 threshold.
Negligible value claims allow companies to offset losses from worthless assets, like failed investments, against other taxable gains.
Proper reporting, including filing Corporation Tax returns and maintaining records for six years, is essential to avoid penalties, as shown by Hobbledehoy Holdings Ltd.’s 2023 fine.
Consulting a tax adviser is critical to tailor reliefs and strategies to your company’s specific circumstances, ensuring compliance and tax efficiency.
FAQs
**Q1: What is the difference between Capital Gains Tax and Corporation Tax for companies in the UK?**
A: Capital Gains Tax (CGT) applies to individuals and trusts on profits from asset disposals, while companies pay Corporation Tax on chargeable gains, which are included in their overall taxable profits at rates of 19% for profits up to £50,000 or 25% for profits over £250,000 in the 2025/26 tax year.
**Q2: Do non-UK resident companies pay tax on gains from UK assets?**
A: Non-UK resident companies must pay Corporation Tax on gains from disposing UK land or property since April 2019, but other assets like shares are generally not subject to UK tax unless the company has a permanent establishment in the UK.
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**Q3: How does HMRC define a ‘disposal’ for companies?**
A: HMRC considers a disposal to include selling, gifting, transferring, or exchanging an asset, or receiving an insurance payout for a destroyed asset, with the gain calculated based on proceeds or market value.
**Q4: Are there any assets exempt from chargeable gains for UK companies?**
A: Yes, assets like cars, wasting assets with a lifespan under 50 years, and certain government securities are exempt from chargeable gains for companies, though specific conditions apply.
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**Q5: Can a company offset capital losses against other types of income?**
A: Companies can offset capital losses against chargeable gains in the same or future tax years, but not against trading income or other profits, unlike individuals who may offset certain losses against income.
**Q6: What is the Substantial Shareholding Exemption (SSE) for companies?**
A: The SSE exempts gains on share disposals if a company holds at least 10% of another company’s shares for 12 continuous months and meets trading company criteria, potentially eliminating Corporation Tax on those gains.
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**Q7: How does Business Asset Rollover Relief work for companies?**
A: This relief allows companies to defer Corporation Tax on gains by reinvesting proceeds from one business asset into another within three years, provided both assets are used for trading purposes.
**Q8: Do UK companies pay tax on gains from overseas assets?**
A: UK companies pay Corporation Tax on gains from overseas assets if they are UK-resident, but double taxation relief may apply if the gain is taxed in another country, subject to tax treaties.
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**Q9: What are the penalties for late reporting of property disposals by companies?**
A: Failing to report UK property disposals within 60 days can result in penalties starting at £100, increasing to £300 for late filings, with additional interest on unpaid tax.
**Q10: Can companies claim relief for assets transferred to an Employee Ownership Trust (EOT)?**
A: Yes, disposals to an EOT can qualify for relief, potentially reducing the gain to zero if conditions like employee benefit requirements are met, as updated in October 2024 to prevent tax avoidance.
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**Q11: How does the indexation allowance work for companies in 2025?**
A: The indexation allowance, frozen since 31 December 2017, adjusts the cost of assets acquired before that date for inflation, reducing the taxable gain, but it’s not available for post-2017 acquisitions.
**Q12: Are gains on intellectual property taxed differently for companies?**
A: Gains on intellectual property, like patents or trademarks, are treated as chargeable gains and taxed under Corporation Tax, but specific reliefs like the Patent Box may reduce tax on related profits.
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**Q13: What records must companies keep for chargeable gains?**
A: Companies must retain records of acquisition costs, disposal proceeds, improvement expenses, and valuations for at least six years to support Corporation Tax returns and HMRC audits.
**Q14: How does group relief affect asset transfers between related companies?**
A: Transfers between companies in the same group can be treated as tax-neutral under group relief, avoiding immediate Corporation Tax if a joint election is filed with HMRC.
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**Q15: Can companies claim losses on assets that become worthless?**
A: Yes, companies can claim a negligible value loss for assets like shares that become worthless, offsetting these against other chargeable gains, provided HMRC approves the claim.
**Q16: Do companies need to pay Corporation Tax on gains from selling their own shares?**
A: No, companies don’t pay tax on gains from selling their own shares, as this is typically treated as a capital transaction, not a chargeable gain, under HMRC rules.
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**Q17: How does the 2025/26 tax year affect small companies with low profits?**
A: Small companies with profits up to £50,000 benefit from a 19% Corporation Tax rate on chargeable gains, while those between £50,001 and £250,000 get marginal relief, reducing the effective rate.
**Q18: Are there special rules for companies in liquidation regarding gains?**
A: Gains on asset disposals during liquidation are still subject to Corporation Tax, with distributions to shareholders potentially treated as capital gains for individuals, depending on the structure.
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**Q19: Can companies defer tax on gains through share exchanges?**
A: Yes, share-for-share exchanges in corporate reorganisations can defer Corporation Tax on gains if they qualify as a tax-neutral transaction under HMRC’s reconstruction relief rules.
**Q20: How does HMRC treat gains on assets held in a company pension scheme?**
A: Gains on assets held in a registered company pension scheme are generally exempt from Corporation Tax, as pension funds benefit from tax-advantaged status under UK law.
The Author:
Adil Akhtar, ACMA, CGMA, CEO and Chief Accountant of Pro Tax Accountant, is an esteemed tax blog writer with over 10 years of expertise in navigating complex tax matters. For more than three years, his insightful blogs have empowered UK taxpayers with clear, actionable advice. Leading Advantax Accountants as well, Adil blends technical prowess with a passion for demystifying finance, cementing his reputation as a trusted authority in tax education.
Email: adilacma@icloud.com
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