Business Asset Rollover Relief — Deferring Capital Gains Tax When You Replace Business Assets (2026)

What Rollover Relief Actually Does

When you dispose of (usually sell) a qualifying business asset and reinvest the proceeds in a new qualifying asset, business asset rollover relief lets you defer the capital gain. The gain isn't cancelled — it is "rolled over" into the new asset by reducing the new asset's base cost (the figure you'll later deduct from its sale price when you work out CGT). In plain terms, you don't pay CGT now; instead the gain is parked inside the replacement asset and only comes home to roost when you eventually sell that replacement without buying yet another qualifying asset.

The practical benefit is cash flow. A growing trade business can keep upgrading its premises, yard or fixed plant without losing a chunk of the proceeds to tax at each step. The deferred gain sits dormant until you cash out for good.

Which Assets Qualify

Rollover relief only applies to specific categories of asset, and both the old asset you sold and the new asset you buy must be used in your trade. The main qualifying categories are:

• Land and buildings used in the trade — a workshop, a yard, a storage unit, business premises, or land you operate from. This is the most common category for trade businesses.
• Fixed plant and machinery — plant and machinery that is fixed in place (for example a large fixed press, a fixed spray booth or fixed workshop equipment).
• Goodwill — for individuals and partnerships (not companies).
• Certain other categories, including ships, aircraft, hovercraft, and some quotas and fishing rights — rarely relevant to trade businesses but they exist.

There is an important distinction to watch. Trading stock does not qualify, and most movable plant, tools and vehicles do not qualify in the same way that land and buildings do — a van or a movable mixer is not the same as a fixed installation or premises. The key word is "fixed": fixed plant and machinery can qualify, but loose, movable kit generally cannot. If your replacement spend is mostly on a new van and hand tools rather than a building or fixed installation, rollover relief may not be available, so check before you assume it applies.

The Reinvestment Window

Timing is strict. To roll the gain over, you must acquire the new qualifying asset within a window that runs from 12 months before the disposal of the old asset to 3 years after it. So you don't have to sell first and buy later — if you bought the bigger workshop up to a year before selling the old one, that still counts. But buy more than three years after the sale and the window has closed.

HMRC can extend the window in limited circumstances (for example where there was a genuine reason the reinvestment couldn't happen in time), but you should not rely on an extension. Plan your purchase to land inside the standard 12-months-before-to-3-years-after window.

Full Relief vs Partial Relief — You Must Reinvest the Whole Proceeds

This is the point most people get wrong. To defer the entire gain, you must reinvest all of the disposal proceeds — not just the gain — into the new qualifying asset. The relief is measured against the sale proceeds, not the profit.

If you reinvest only part of the proceeds and keep some cash back, relief is restricted. Broadly, the amount you keep (the proceeds not reinvested) is taxed now, up to the size of the gain, and only the remainder is rolled over. So holding back £30,000 of proceeds typically means up to £30,000 of gain becomes chargeable straightaway. If the cash you keep back is equal to or more than the whole gain, you get no rollover relief at all on that disposal.

How the Gain Reduces the New Asset's Base Cost

When you roll a gain over into a non-depreciating asset (such as freehold land and buildings), the deferred gain is deducted from the cost of the new asset. That gives the replacement a lower base cost for CGT purposes. Years later, when you sell the replacement without buying another qualifying asset, the gain on it is calculated against this reduced cost — which effectively brings the old deferred gain back into charge alongside any new growth.

In other words, rollover relief defers tax; it does not make the original gain disappear. The deferred amount travels with the replacement asset and is settled when you finally exit.

Depreciating Assets Work Differently (Held Over, Not Rolled Over)

If the new asset is a depreciating asset — broadly one with an expected life of 60 years or less, such as fixed plant and machinery, or a lease with under 60 years left to run — the gain is not deducted from its base cost. Instead the gain is held over (parked) separately rather than rolled into the new asset.

A held-over gain crystallises (becomes chargeable) on the earliest of three events:

• You dispose of the new (replacement) asset;
• The new asset stops being used in your trade; or
• Ten years pass from when you acquired the new asset.

One useful planning point: if, before that held-over gain crystallises, you reinvest into a fresh non-depreciating qualifying asset (such as freehold premises), you can usually transfer the held-over gain into that asset instead and convert it back into a full rollover. An accountant can sequence this for you.

Both Assets Must Be Used in the Trade

Rollover relief is for assets used in a trade, not investment assets. The old asset must have been used in your business, and the new asset must be brought into use in the business too. If a building was let out to a third party rather than used by your own trade, or if part of it was used for non-trade purposes, the relief is restricted accordingly. Where an asset is only partly used for the trade, the relief is apportioned.

Worked Example: Replacing a Workshop

Say you bought your original workshop years ago for £150,000 and you now sell it for £260,000. The gain is £110,000. You reinvest in a larger workshop costing £300,000.

• Proceeds from the old workshop: £260,000
• Gain on the old workshop: £110,000
• Cost of the new workshop: £300,000

Because you reinvested all the proceeds (you spent more than £260,000 on the replacement), you can roll over the whole £110,000 gain. No CGT is due now. The new workshop's base cost is reduced by the rolled-over gain: £300,000 − £110,000 = £190,000. If you later sell the new workshop for, say, £340,000 without buying another qualifying asset, your gain would be £340,000 − £190,000 = £150,000 — which captures both the deferred £110,000 and the £40,000 of new growth.

Now suppose instead you only spent £240,000 on the replacement and pocketed £20,000 of the proceeds. You did not reinvest all £260,000, so £20,000 of the gain becomes chargeable now and only £90,000 is rolled over into the new asset. Keep back £110,000 or more, and no rollover relief is available on that disposal at all.

It's a Claim — And There's a Deadline

Rollover relief is not automatic. You have to claim it. The general time limit is 4 years from the end of the tax year in which you made the disposal (or, if later, the year you acquired the new asset). Miss the claim window and you lose the relief, even if you would otherwise have qualified.

For companies the same broad principles apply under the corporation tax rules, with the gain deferred against the replacement business asset in much the same way. The categories of qualifying asset and the reinvestment window are essentially aligned, though goodwill rollover is for individuals and partnerships rather than companies.

Because the figures feed directly into your future CGT position and the calculation has several moving parts — apportionment for mixed use, depreciating-asset rules, partial reinvestment restrictions — this is one to get an accountant to run. The cost of advice is small against the tax at stake on a premises sale.

Quick Reference: Business Asset Rollover Relief