When you sell a hair or beauty salon, most of the money rarely sits in the chairs, mirrors and stock. It sits in the goodwill, the value of your client book, your reputation and your trading name. And that is the part the tax rules care about most.
Get the structure of the deal right and you can pay Capital Gains Tax at a reduced rate on a large chunk of the proceeds. Get it wrong, or miss a qualifying condition, and you can hand HMRC far more than you needed to.
This guide explains how goodwill is taxed when you sell a salon, what Capital Gains Tax (CGT) you pay for 2026/27, and how Business Asset Disposal Relief (BADR) can lower the rate. It also covers what changes when you are the one buying.
It is written for salon owners, barbers and beauty business owners. If you want this handled properly, that is what we do at Zmartly for hairdressers and beauty businesses.
How is the tax on selling a salon worked out?
When you sell a salon as a sole trader or partnership, you are not taxed on one lump sum. You are taxed on the gain attached to each business asset you dispose of, and goodwill is usually the biggest one. The gain on goodwill and other qualifying business assets is charged to Capital Gains Tax, and Business Asset Disposal Relief can reduce the rate to 18% for 2026/27, up to a £1 million lifetime limit, if you meet the conditions.
What is goodwill and why does it matter when you sell?
Goodwill is the value of your salon over and above its physical assets. It is what a buyer pays for the things that do not appear on a stock list: your loyal client base, your location and footfall, your trading name and reviews, and the relationships your stylists or therapists have built.
A salon with a full appointment book and a strong local reputation is worth far more than the sum of its dryers and treatment couches. That premium is goodwill, and in most salon sales it is the single largest figure in the deal.
This matters for tax because goodwill is a chargeable asset. When you sell it, you make a capital gain, the difference between what you receive for the goodwill and what it cost you (often nil, if you built the salon up yourself). That gain is what CGT bites on.
So how you value and document the goodwill, and how the sale is structured, drives the whole tax outcome. It is worth getting that right before you sign anything.
How is a salon sale taxed: asset sale or share sale?
There are two ways to sell, and they are taxed differently.
In an asset sale, the buyer buys the individual assets of the business, the goodwill, the fit-out, the equipment and the stock, but not the legal entity. This is how most sole traders and partnerships sell, because there is no company to sell. You make a capital gain on each qualifying asset.
In a share sale, the salon trades through a limited company, and you sell your shares in that company. The buyer takes on the whole company, including its history and liabilities. You make a single capital gain on the disposal of your shares.
The structure affects who pays what and which reliefs are available.
| Feature | Asset sale (sole trader or partnership) | Share sale (limited company) |
|---|---|---|
| What is sold | Goodwill, equipment, stock, fit-out | Shares in the company |
| Who is taxed on the gain | You personally, on each asset | You personally, on the shares |
| Tax on the gain | Capital Gains Tax | Capital Gains Tax |
| Relief that may apply | Business Asset Disposal Relief | Business Asset Disposal Relief |
| Buyer usually prefers | Often yes, cleaner liabilities | Sometimes, for continuity |
Buyers often prefer an asset sale because they leave the company's past liabilities behind. Sellers of incorporated salons may prefer a share sale. The right route depends on your circumstances, and it is one of the first things to settle.
What Capital Gains Tax do you pay when selling a salon?
For 2026/27, you have a Capital Gains Tax annual exempt amount of £3,000. That is the slice of total gains you can make in the year before any CGT is due.
Above that, if Business Asset Disposal Relief does not apply, gains on business assets such as goodwill are taxed at the main CGT rates for assets other than residential property: 18% where the gain falls within your remaining basic rate band, and 24% above it, for 2026/27.
Because a salon sale usually produces a large one-off gain, much of it tends to fall into the higher 24% band once it is stacked on top of your other income for the year. That is exactly the situation Business Asset Disposal Relief is designed to soften.
| 2026/27 CGT figure | Rate or amount |
|---|---|
| Annual exempt amount | £3,000 |
| Main rate, basic rate band (non-residential assets) | 18% |
| Main rate, higher and additional band (non-residential assets) | 24% |
| Business Asset Disposal Relief rate | 18% |
Note that the Business Asset Disposal Relief rate rose to 18% for disposals from 6 April 2026. For disposals in 2025/26 (6 April 2025 to 5 April 2026) the BADR rate was 14%, and before 6 April 2025 it was 10%. If your completion date straddles a tax year, the date of disposal decides which rate you get.
How does Business Asset Disposal Relief work?
Business Asset Disposal Relief, previously called Entrepreneurs' Relief, lets you pay a reduced CGT rate of 18% for 2026/27 on qualifying gains, up to a lifetime limit of £1 million of gains. The lifetime limit is per person, and it counts all qualifying claims you have ever made, not just this sale.
To qualify when you sell all or part of an unincorporated salon, you must have been a sole trader or business partner, and you must have owned the business for at least 2 years up to the date of sale. The disposal also has to be a genuine withdrawal from that business, not a reshuffle.
If your salon trades through a company and you sell shares, the conditions are tighter. For at least 2 years up to the sale you must have held at least 5% of the ordinary shares and voting rights, the company must be a trading company, and you must have been an officer or employee of it. These are HMRC's "personal company" conditions.
There is one trap that catches salon owners who have incorporated. If you disposed of your business to a close company in which you and connected people own 5% or more of the shares on or after 3 December 2014, any gain on the goodwill in that transfer does not qualify for Business Asset Disposal Relief. In plain terms, you generally cannot sell your own goodwill into your own company and claim BADR on it. If incorporating your salon is on your mind, take advice on the goodwill position first, because this is easy to get wrong.
Illustrative example: selling a salon with goodwill
Illustrative example. Imagine Sofia has run a hair salon as a sole trader for nine years. She sells the business in the 2026/27 tax year as an asset sale. The buyer pays £230,000, broken down as goodwill £190,000, fit-out and equipment £30,000, and stock £10,000.
Sofia built the salon up herself, so the goodwill cost her nothing. The equipment had already been written down through capital allowances, and the stock is sold at roughly cost, so for simplicity her chargeable gain comes almost entirely from the goodwill. Her gain on the goodwill is £190,000.
She has owned the business for more than 2 years as a sole trader and is making a genuine withdrawal, so she qualifies for Business Asset Disposal Relief, and she has never claimed it before.
Her CGT works out like this:
| Step | Amount |
|---|---|
| Gain on goodwill | £190,000 |
| Less annual exempt amount (2026/27) | £3,000 |
| Taxable gain | £187,000 |
| Tax at the BADR rate of 18% | £33,660 |
So Sofia's Capital Gains Tax bill is £187,000 x 18% = £33,660.
Compare that to the position without the relief. If the whole £187,000 fell to be taxed at the main 24% rate, the bill would be £187,000 x 24% = £44,880. Business Asset Disposal Relief saves her £11,220 here (£44,880 minus £33,660). Her gain of £190,000 is also comfortably inside the £1 million lifetime limit, so all of it qualifies.
These figures are illustrative. Your own position depends on the asset split agreed in the sale, your other income in the year, your base costs and whether you meet every BADR condition.
What do you need to think about when buying a salon?
If you are on the other side of the deal, the tax considerations flip.
When you buy salon assets, the price you agree for each asset becomes your base cost for the future. The goodwill figure you pay is what you will measure your own gain against if you later sell, so getting the allocation right in the sale agreement protects you down the line.
Equipment and fixtures you buy may qualify for capital allowances, which can give you tax relief against your trading profits. Stock you buy becomes a cost of sales in your accounts. How the purchase price is split across goodwill, plant and stock therefore matters to both sides, and buyer and seller often want it split differently, so it gets negotiated.
You will also need to think about whether to buy as a sole trader or set up a limited company, how to handle VAT if the seller is registered (a sale of a business as a going concern can fall outside VAT, but conditions apply), and whether to take on the existing staff, who usually transfer with their employment rights protected. Each of these has its own tax and payroll consequences. Our tax advisory team can model the options before you commit.
When and how do you report the tax?
A salon sale is not residential property, so the 60-day CGT reporting rule does not apply. You report the gain on the goodwill and other business assets through your Self Assessment tax return for the tax year in which you sold, and you pay the CGT by the normal deadline of 31 January following the end of that tax year. You can also use HMRC's real time Capital Gains Tax service to report sooner if you prefer.
You claim Business Asset Disposal Relief on the same return, and there is a separate deadline for the claim itself, so do not leave it to the last minute. Keep the sale agreement, the asset allocation and your records of original cost, because HMRC can ask you to support both the gain and the relief.
The single most valuable thing you can do is plan before you sign, not after. The asset split, the timing of completion across a tax year boundary, and the BADR conditions all need to line up, and once the deal is done they are difficult to fix.
Thinking of selling or buying a salon and want the tax handled properly from the start? Book a free call with a Zmartly accountant and we will map out the most tax-efficient way to structure your deal.
Frequently asked questions
Do I pay tax on the goodwill when I sell my salon?
Yes. Goodwill is a chargeable asset, so the gain you make on it, broadly the goodwill price less what it cost you, is subject to Capital Gains Tax. For salons built up from scratch, the cost of the goodwill is often nil, so most of the goodwill price is taxable gain, though Business Asset Disposal Relief may reduce the rate.
What CGT rate applies when I sell a salon in 2026/27?
If Business Asset Disposal Relief applies, qualifying gains are taxed at 18% for 2026/27, up to your £1 million lifetime limit. If it does not apply, gains on business assets are taxed at 18% within your remaining basic rate band and 24% above it. Everyone also has a £3,000 annual exempt amount for 2026/27.
Can I claim Business Asset Disposal Relief on my salon?
You can if you meet the conditions. As a sole trader or partner you must have owned the business for at least 2 years and be genuinely withdrawing from it. If you sell company shares, you must have held at least 5% of the shares and voting rights, been an officer or employee, and the company must be a trading company, for at least 2 years up to the sale.
Is it better to sell my salon as an asset sale or a share sale?
It depends on whether you trade as a sole trader, a partnership or a limited company, and on what the buyer wants. Sole traders and partnerships sell assets, including goodwill. Incorporated salons can sell shares. Buyers often prefer an asset sale to avoid inheriting liabilities, but the tax outcome for you can differ, so it is worth taking advice before agreeing the structure.
Do I have to report a salon sale within 60 days?
No. The 60-day reporting and payment rule only applies to UK residential property. A salon sale is reported on your Self Assessment tax return, with the Capital Gains Tax due by 31 January following the end of the tax year of sale. You can report earlier using HMRC's real time service if you wish.
