The short answer on how a care home sale is taxed
Selling a care home is taxed as two things at once: the property you are selling and the goodwill of the business running inside it. The contract puts a figure against each, the property gain and the goodwill gain are worked out separately, and the way you structure the deal, as a sale of shares or a sale of the trade and assets, decides how many times that value is taxed before it reaches you. Two owners can agree the same 3 million pound price and walk away with sums that differ by a six figure margin, purely on how the sale was built.
So the useful question is not "what is the tax rate on a care home". It is "how is the price split, and who gets taxed on each part". That is where a specialist earns their fee, and it is why the planning starts long before a buyer is in the room. LOYALS is a King's Cross firm of accountants for care home owners across London, and we run this analysis for owners well ahead of a sale so the structure, not the deadline, drives the decision.
Why the price is split between property and goodwill
Every care home sale apportions the price across what is actually changing hands. In most homes that means three things: the freehold or long leasehold property, the goodwill of the trading business, and the fixtures, equipment and any stock. The property is usually the largest slice, the goodwill reflects the value of the operating business including its occupancy, contracts and reputation, and the fixtures are a smaller balancing figure.
The split matters because each part is taxed on its own footing and pulls in a different direction. A higher figure against the property increases the buyer's stamp duty and, if there is a gain, the seller's property gain. A higher figure against goodwill changes the seller's position and what the buyer can do with it afterwards. Because the two sides often want the split to fall in opposite ways, the number is negotiated, and this is exactly where we advise owners to be firm on the point that matters most: fix the property and goodwill split in the heads of terms, with an independent valuation behind it, before exchange. A split that plainly suits one side is the one HMRC questions later, so a defensible valuation protects both the price and the tax treatment.
The chart above uses an illustrative sale to show the shape of it. On a 3 million pound price split 2 million to the property and 1 million to goodwill, and assuming a low base cost, the chargeable gain works out at roughly 1.4 million on the property and 1 million on the goodwill, about 2.4 million in total. Business Asset Disposal Relief, the relief that gives a lower capital gains tax rate on a business sale, only ever covers the first million pounds of qualifying gain, so most of a sale this size is taxed at the standard rate whichever way you cut it. That single fact shapes everything that follows.
Should you sell the shares or the assets?
This is the decision that moves the most money, and buyers and sellers usually start on opposite sides of it. If your care home is run through a limited company you can sell the shares in that company, or you can keep the company and sell its trade and assets out of it. The tax outcome is very different.
Sell the shares and you have one taxable event. You make a capital gain on your shares, and if you qualify for Business Asset Disposal Relief the first million pounds of that gain is taxed at 18 percent for disposals on or after 6 April 2026, with the balance at 24 percent, the higher capital gains tax rate for 2026 to 2027. Sell the trade and assets instead and the company is taxed first, on the property and goodwill gains, at the corporation tax main rate of 25 percent. Then, to get the cash out of the company and into your own hands, you are taxed a second time, usually as a capital distribution on winding the company up. Two layers, not one.
Put numbers on it and the gap is stark. Take the same 3 million pound sale. As a share sale, a gain of about 3 million pounds attracts 18 percent on the first million, 180,000 pounds, and 24 percent on the remaining 2 million, 480,000 pounds, a capital gains tax bill near 660,000 pounds and roughly 2.34 million pounds left in your pocket. As a company asset sale, the company pays about 600,000 pounds of corporation tax on its 2.4 million pound gain, leaving 2.4 million pounds inside the company, and extracting that through a liquidation with the relief costs a further 516,000 pounds or so, leaving about 1.88 million pounds. The share route keeps roughly 456,000 pounds more.
Buyers, though, often prefer the asset route. It leaves the historic liabilities of the company behind, it lets them claim capital allowances on the fixtures and, in some cases, write off the goodwill they pay for, and it gives a cleaner slate for regulatory registration. So the share or asset question is rarely settled by tax alone; it is a negotiation, and the price often moves to reflect who carries the extra cost. Our honest advice to an owner is to model both routes on your real numbers before you ever name a price, so you know what a buyer's preference for an asset deal is actually worth to you and can hold the line or trade it away with your eyes open.
Does it matter whether the property is inside the company?
It matters a great deal, and it is the single detail we most often need to pin down before anything else. Where the care home building sits, inside the trading company or held personally by you and rented to the company, changes the capital gains tax, the stamp duty and the VAT treatment of the whole deal, so the right structure genuinely depends on a fact we cannot assume for you.
If the property sits in the company, it is sold with everything else and there is one set of gains to deal with at company level, or it passes with the shares in a share sale. If you own the property personally and rent it to the company, it is a separate disposal that you make yourself. That can be useful, but there is a trap worth knowing: where you have charged the company full market rent, Business Asset Disposal Relief on the property gain is restricted for the period after 5 April 2008 during which rent was paid. In plain terms, charging yourself a commercial rent over the years can quietly cost you the lower tax rate on the building when you sell, and that is not something you can undo at the last minute. If your property is held personally, treat the relief on it as an open question until it has been checked properly against the rent you have actually charged.
Who pays stamp duty, and what about VAT?
Stamp duty is the buyer's cost, not yours, but it shapes the deal because a buyer prices it in. A care home counts as non residential property for stamp duty land tax, so an asset purchase is charged at the non residential rates: nothing on the first 150,000 pounds, 2 percent on the slice to 250,000 pounds, and 5 percent above that. On a 2 million pound building that is about 89,500 pounds of stamp duty for the buyer. A share purchase avoids SDLT entirely and pays only 0.5 percent stamp duty on the shares, which is one more reason a buyer's preference for assets has a real price attached to it.
VAT usually stays out of a care home sale, but only if it is handled correctly. Where the buyer carries on the same care business without a break and meets the conditions, the sale is treated as a transfer of a going concern and falls outside VAT, so no VAT is charged on the price. Care itself is largely VAT exempt, which keeps most homes simple, but there is one wrinkle: if the property has been opted to tax, the buyer must opt to tax as well and notify HMRC by the completion date, and confirm to you that their option will not be disapplied, or the going concern treatment on the property can fail. It is a box worth ticking early rather than discovering on completion day.
How to get a care home ready to sell
The best price and the cleanest tax outcome both come from preparation, not negotiation. A buyer paying seven figures wants three years of clean, filed accounts they can trust, and HMRC wants a split it can believe. The reliefs that save the most, Business Asset Disposal Relief in particular, turn on conditions you have to meet for at least two years before you sell, which is why we tell owners to check them at least two years out: they cannot be repaired once a buyer is at the table.
Used well, the three years before a sale are when the value is protected. Get the accounts clean and the numbers consistent, settle where the property sits and start the two year relief clock, obtain independent valuations for the property and the goodwill, and agree the split early so it is not a fight at exchange. Do that and the sale itself becomes the easy part. The single biggest mistake we see is treating the sale as a moment rather than a process, and finding out too late that a relief was lost or a split cannot be defended.
If you own or run a care home and want this mapped onto your own numbers, this is core work for us. As specialist care home accountants we sit alongside owners on structure, the property and goodwill split, and the tax planning that decides what a sale actually leaves you, and we would rather have that conversation three years early than three weeks before completion.