Selling up as a sole trader: tax, valuation and practical steps

Deciding to sell your business as a sole trader is a big decision to make.

What you transfer to a buyer during a sale are your assets, customer relationships, and goodwill that make the business valuable, rather than the legal shell of the business itself.

In this guide, we examine all aspects of selling a business, from valuing it to paying any tax due on the sale’s value.

Selling a business if you’re self-employed is different from selling a limited company; we also highlight the differences throughout the guide.

What’s in this guide?

• What you are actually selling
• Valuing your business
• Finding a buyer
• Structuring the deal
• Due diligence and legal checks
• Tax implications
• Transition, handover and insurance
• After the sale: paperwork and HMRC
• Selling a limited company
• Frequently asked questions

What you are actually selling

A sole trader business is a different legal entity from a limited company.

You and the business are legally the same person, so you can’t sell “the sole tradership” itself. What you can sell are the things that make your business valuable.

That might include physical assets such as stock, tools, machinery, or office equipment.

For many small firms, the most valuable part is intangible – things like your trading name, website, customer database, supplier relationships, contracts, or simply the goodwill you’ve built up with clients over the years.

For example, a tradesperson might sell their van, tools, phone number and ongoing jobs.

An e-commerce seller might hand over their Shopify store, social media accounts, email list and supplier agreements.

A consultant might sell its list of clients and domain name.

The exact mix of what makes up your business depends on what you’ve built, but the principle is the same: you’re transferring assets and relationships, not a separate legal entity.

How do you value your business?

This is famously one of the most challenging questions to answer, as it depends on numerous variables.

Buyers want to know what future income they can expect, while sellers want recognition for past effort.

Here are some of the most typical methods people use to value a business:

• Asset value: adding up the worth of equipment, stock and tangible items.
• Earnings multiple: applying a multiplier to annual profit, adjusted for risk.
• Goodwill: estimating what the brand, reputation and client relationships are worth.

In practice, a business is only worth what someone is willing to pay for it.

You might calculate a figure based on accounts and industry norms, but until you find a buyer who agrees to your valuation, it’s just a number.

That’s why presentation matters: clean books, clear contracts, and a simple story about why the business will continue to earn money without you.

For more on common methods and other things to bear in mind, see our guide to valuing a small business.

How do you find a buyer?

Many sole traders never get to this stage because they don’t know where to look.

Potential busyers include competitors seeking to expand, suppliers looking to enter the retail or direct sales market, existing employees, or even family members.

Business brokers and online sale platforms can also help, although some costs will be involved.

Buyers will usually want to talk through why the business makes sense for them, how they’ll keep customers coming back, and what handover support you can realistically provide.

How do you structure a sale?

Most sole trader sales are documented via an asset purchase agreement.

This spells out what is being sold and what is excluded. For instance, you might sell the trading name, customer list and stock, but keep your van and personal laptop.

Payment can be structured in different ways. Some buyers will pay in a lump sum on completion. Others might agree to pay in instalments, or an earn-out where part of the price depends on future performance.

Earn-outs are common when much of the value lies in retaining customers, as the buyer wants protection in case the customers don’t stay.

Non-competition clauses are common. A buyer doesn’t want to pay for goodwill only to see you set up a competing business nearby. You may be asked to agree not to trade in the same sector or area for a fixed period.

It’s essential to clarify who is responsible for any outstanding debts, supplier contracts, or warranties.

In most sole trader sales, any liabilities remain with the seller unless they are specifically transferred to the buyer.

Due diligence and legal checks

Even in a small business sale, buyers will always want reassurance about what they are paying for.

They will need to see bank statements, accounts, invoices, supplier contracts, lease agreements, or proof of ownership for equipment.

For obvious reasons, the more information you prepare in advance, the smoother the sale process will be.

A buyer may also want warranties from you, such as confirmation that you own the assets and that there are no hidden debts.

Unless you’re dealing with a straightforward, low-risk sale, we always advise hiring a solicitor to help draft any sales agreements, to make sure both sides are protected

In some cases, you might need to sign a confidentiality agreement too.

How does tax work when you sell a business?

If you sell your business, you might have to pay Capital Gains Tax (CGT) on the profit you make from selling assets or goodwill.

This gain is the difference between what you originally paid for your assets and the amount you receive when you sell them.

For the 2025/26 tax year, the CGT allowance is £3,000. Gains above this are taxed at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. See GOV.UK: Capital Gains Tax.

Business Asset Disposal Relief (BADR)

BADR can reduce the rate to 14% on qualifying gains (rising to 18% in April 2026), up to a lifetime limit of £1 million. To qualify, you must:

• Have owned the business for at least two years before the sale.
• Be selling all or part of a genuine trading business.
• Stop trading after the sale.

Read our full guide to BADR for more details.

Some BADR examples

Here are a couple of simple examples. In practice, if your gain takes you across the basic and higher bands, HMRC will charge each portion at the relevant rate.

Example 1
You sell assets and goodwill for £50,000. The initial cost was £20,000, so your gain is £30,000.

After the CGT £3,000 allowance, the remaining £27,000 remains taxable.

• With BADR: 14% of £27,000 = £3,780

• At basic CGT rate: 18% of £27,000 = £4,860

• At higher CGT rate: 24% of £27,000 = £6,480

Example 2
An e-commerce business sells for £80,000 with a £30,000 cost base. Gain = £50,000.

After the CGT allowance (£3,000), the remaining £47,000 is taxable.

• With BADR: 14% of £47,000 = £6,580

• At basic CGT rate: 18% of £47,000 = £8,460

• At higher CGT rate: 24% of £47,000 = £11,280

Timing matters too: the tax year in which you sell can affect your overall income and may push you into a higher tax band.

We recommend hiring an accountant to assist you when selling your business.

Transition, handover and insurance

A buyer will want reassurance that customers, suppliers or staff will stay after the sale.

You may be asked to assist with a handover period, including making introductions, transferring accounts, and training the buyer on systems or processes.

For a tradesperson, that might mean finishing existing jobs with the buyer at your side.

For an online business, it could involve handing over login details, supplier terms and marketing assets.

During any handover, you may still need your business insurance in place.

Public liability or professional indemnity cover should continue until you officially stop work.

If you cancel too early, you could be exposed if a claim arises from work done before the sale.

After the sale: paperwork and HMRC

Once the business has been sold, you still have a set of tax and legal jobs to finalise.

You’ll need to file a final Self Assessment return covering income up to the date of sale, declare any capital gains, and settle tax or National Insurance owed.

If you were VAT registered, you may need to submit a final VAT return and deregister. If you had employees, you must close your PAYE scheme and deregister as an ’employer’ with HMRC.

The detail of this process is covered fully in our separate guide on closing down as a sole trader.

What if you’re selling a limited company?

Selling a business through a limited company operates differently, as the company is a separate legal entity from its owners.

The company itself can be sold through a share sale, or its assets can be sold by the company.

This creates different tax and legal obligations, and the distinction between shareholder and company becomes important.

While this guide focuses on sole traders, it is helpful to be aware of the differences so you don’t confuse the two processes.

Frequently asked questions

Is my business worth anything if it’s just me?

It depends. If all the value comes from your personal labour, it may be hard to sell. However, if you have a client list, a strong brand, or systems that someone else can run, there may still be value.

What if a buyer won’t pay my asking price?

Ultimately, your business is only worth what someone is prepared to pay. You can set a figure, but negotiation is inevitable. Be ready to justify your valuation with evidence, and be realistic about the market.

Do I need a solicitor to sell my business?

For even a small sale, it’s sensible to use a solicitor to draft the asset purchase agreement. This protects you from future disputes and makes the deal enforceable.

How quickly can I sell?

Some businesses change hands within weeks, but others take months to find a buyer. Preparation shortens the process: clean accounts, clear asset lists, and a realistic price attract serious interest faster.

What happens to my staff if I have employees?

If you employ staff, employment law may require that their contracts transfer to the buyer under the TUPE rules. This area can be complex, and it is strongly recommended to seek legal advice.

What if I only sell part of the business?

You can carve out parts of the business in the agreement. For example, you might sell your online shop but continue with a separate consultancy business. You would remain self-employed for part of your current business.

Will I still have to file a tax return after the sale?

Yes. You must file a final Self Assessment return covering the period up to the date you sold. You also need to declare any capital gains. After that, if you stop all self-employment, you can deregister and won’t need to file future returns unless you have other income that requires it.

Do I need to stay on after the sale?

Often yes. Many deals involve a short transition period where you help the buyer settle in. The length and scope can be negotiated.

Can I start another business straight away?

Not if you’ve signed a non-competition clause. These clauses typically prevent you from setting up in the same trade or area for a year or more. Always check what you’re agreeing to.