Serving as a company director carries significant legal, financial, and ethical duties. Directors are responsible for the leadership and governance of a company, and failure to act in line with legal obligations can result in personal liability, financial penalties, or other sanctions.Capital Gains Tax applies when you sell or dispose of certain assets and make a profit. Careful planning can significantly reduce the tax payable by using available reliefs and exemptions correctly.
A director is an individual appointed to manage and oversee the operations of a company. Directors make key strategic and commercial decisions, including financial management, corporate compliance, and duty to stakeholders such as shareholders, employees, and regulators.
Directors are required to act in accordance with statutory duties, including:
Directors must act in the best interests of the company and its shareholders, considering long-term success and stakeholder interests.
Directors should make decisions based on their own evaluation and not simply follow others’ guidance without proper consideration.
Directors are expected to demonstrate competence, attention to detail, and informed decision-making in the exercise of their roles.
Directors must not place themselves in a position where personal interests conflict with the company’s interests. Any potential conflicts should be declared and managed appropriately.
Directors should not accept gifts or advantages from third parties that could influence their decision-making without proper disclosure.
If a director has a personal interest in a transaction involving the company, this must be properly disclosed to the board.
Directors play a central role in the financial stewardship of their company:
Prepare accurate financial records — All financial information must be complete, up-to-date, and reliable.
Ensure accounts are filed on time — Annual accounts must be submitted to HMRC and Companies House by statutory deadlines.
Comply with statutory reporting requirements — Timely submission of tax returns, corporation tax computations and supporting documents is essential.
Monitor cash flow and solvency — Directors must be confident that the company can meet its liabilities as they fall due.
Inaccurate accounts or late submissions can result in fines and, in certain cases, personal liability.
Directors must comply with company law, including:
Maintaining statutory registers
Holding formal board meetings and making minutes
Filing confirmation statements
Updating Companies House records when directors or registered details change
Failing to comply with these obligations can lead to penalties and reputational risk.
Directors owe fiduciary duties to the company, not to individual shareholders or related parties. They must act honestly, transparently, and in good faith, avoiding actions that could prejudice the company’s position.
Good governance and ethical leadership contribute to long-term stability and trust with stakeholders, including investors, suppliers, customers, and regulators.
Although employment law obligations rest primarily with the company, directors share responsibility for:
Ensuring compliance with payroll and tax reporting
Providing a safe working environment
Overseeing workplace policies that protect employees
Effective oversight of health and safety policies, workplace conduct, and statutory requirements is essential.
Directors must monitor the financial health of the company. If the company becomes insolvent (unable to pay debts as they fall due), directors must act quickly and appropriately.
Failing to take reasonable steps in an insolvency situation can result in personal liability for:
Wrongful trading
Misfeasance or breach of duty
Seeking timely professional advice is critical when financial distress arises.
Directors must ensure that:
All company records are accurate and retained for required periods
Accounts and tax returns reflect true and fair information
Decisions and approvals are documented appropriately
Robust records support compliance and reduce the risk of disputes or regulatory concerns.
Directors face a wide range of responsibilities, and the consequences of missteps can be significant. Applegrow Financial Advisors can help you:
Review and strengthen your governance practices
Ensure accurate financial reporting and compliance
Advise on director duties and personal exposure risk
Support board decision making with financial insight
Guide you through challenging situations, including restructuring or growth planning
Whether you are a first-time director or part of an established board, Applegrow can help you meet your duties confidently and professionally.
A capital gain arises when a chargeable asset is sold for more than its original cost. The gain is calculated as:
Sale proceeds (less selling costs)
minus
Purchase price (including acquisition costs)
CGT applies to assets such as shares, business assets, investment property, and certain personal possessions.
For the 2025/26 tax year, CGT rates depend on your total taxable income and gains:
18% on gains that fall within the basic rate income tax band
24% on gains above the basic rate band
These rates apply to most assets, subject to specific exceptions and reliefs.
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can significantly reduce CGT on qualifying business disposals.
For 2025/26:
Qualifying gains are taxed at an effective rate of 14%
The lifetime limit for BADR is £1 million
The rate will increase to 18% from 2026/27
BADR may apply to:
The sale of a sole trade or partnership business
Shares in a personal trading company
Assets used in a business that has ceased within the last three years
Associated disposals (such as personally owned property used in a business) may also qualify, although restrictions can apply, particularly where rent has been charged.
To qualify for BADR on company shares:
You must have been an employee or director
You must hold at least 5% of ordinary share capital
You must hold at least 5% of voting rights
Additional distribution or proceeds tests must be met
The qualifying ownership period is two years leading up to the date of disposal.
Where a shareholder’s holding falls below 5% due to fundraising through new share issues, BADR may still be protected. An election can be made to crystallise the gain before dilution, with the option to defer tax until the shares are actually sold.
This area requires careful planning.
Investors’ Relief is designed for external investors in unlisted trading companies.
Key conditions include:
Shares must be newly issued for cash
The company must be unlisted and trading
Shares must be held for at least three years
The CGT rate under Investors’ Relief is:
14% for 2025/26
Increasing to 18% from 2026/27
The lifetime limit for IR is £1 million.
Each individual can realise gains up to the £3,000 annual exemption (2025/26) without paying CGT. Couples should consider planning disposals jointly to maximise the use of both exemptions.
Shares of the same class in the same company are treated as one pooled asset. However:
Same-day transactions are matched first
Purchases within 30 days after disposal are matched next
Remaining shares are matched from the pooled holding
These rules are designed to prevent short-term tax planning.
Additional reliefs may include:
Private Residence Relief
Business Asset Rollover Relief
Gift Holdover Relief
Offset of carried-forward capital losses
Some disposals, such as those involving EIS, VCTs, or share exchanges, can be complex and should be reviewed in advance.
Capital gains tax planning should always be done before an asset is sold. Early advice can significantly reduce tax exposure and avoid unexpected liabilities.
Applegrow can help you:
Identify available CGT reliefs
Plan business or investment disposals
Structure transactions tax-efficiently
Ensure compliance with current legislation
Ensure your governance framework is robust — contact Applegrow today for practical support.
