How to Sell a Construction Business: Valuation, CIS and Tax in 2026/27

Selling a construction business is not like selling most other companies. Earnings are project-based and lumpy, the balance sheet is heavy with work in progress and retentions, and the deal carries risks a buyer inherits and prices in: latent defects, disputed final accounts, professional indemnity exposure, and bonding that may not survive a change of ownership. Get those right and a good contractor sells well. Get them wrong and the price gets chipped in due diligence, or the deal collapses.

This guide walks through what a construction business is actually worth, who buys them, the sector-specific deal traps that decide your final number, and the tax you will pay on exit at 2026/27 rates. It is general guidance for owner-directors planning a sale, not advice on your specific numbers.

What a construction business is worth: lower, lumpier multiples

The single most important thing to understand about construction valuations is that they run lower than almost every other sector, and for good reasons. Most trading construction companies sell for roughly 2 to 4 times adjusted EBITDA, where a services or software business might command 6 to 10 times. On top of the multiple, the net asset position matters far more than usual, because buyers lean on the balance sheet to underpin a valuation they cannot rest on earnings alone.

Three features of the sector drag the multiple down:

• Lumpy, project-based earnings. Revenue and profit swing sharply year to year with the contracts you win. Buyers pay for reliable, repeatable profit, and one-off tender income is neither. Expect a buyer to value on a multi-year average, not your best year.
• Thin margins and heavy working capital. Cash is tied up in stage payments, retentions and work in progress. A business can be profitable on paper and still fragile on cash.
• Inherited risk. Latent defects, disputed final accounts, retentions that may never be recovered and PI claims all sit with the buyer after completion. That uncertainty is priced in as a lower multiple and often a larger price retention.

What breaks the pattern, and lifts you toward or beyond the top of the range, is recurring, repeatable income: maintenance and term contracts, framework places, planned-preventative work, or a defensible specialist niche (say, a specific remediation, fit-out or M&E capability). A general contractor living tender to tender sits at the bottom of the range. A specialist subcontractor with sticky recurring revenue and a strong order book sits at the top. For how the underlying methods work, from EBITDA multiples to asset-based and net-asset floors, see our business valuation guide, and you can sketch an indicative figure with the business valuation calculator.

Who buys construction businesses

The buyer pool for construction is narrower than for asset-light sectors, which is another reason multiples stay grounded. The realistic buyers are:

• Larger contractors and trade acquirers. The most common buyer. A bigger contractor buys capability, an order book, accreditations, a workforce or geographic reach. They understand the risks and diligence them hard, which is both good (a credible buyer) and demanding (nothing gets past them).
• Regional or national consolidators. Groups rolling up specialist trades (roofing, groundworks, M&E, fit-out) to build scale. These buyers pay well for a clean, specialist business with recurring work and a strong management team that will stay.
• Management buyout teams. Where there is no obvious trade buyer, the existing management may buy the company. This is a structural route, not a finance service we provide.
• An Employee Ownership Trust. A phased exit to your own workforce, funded from future profits, covered below.

Trade buyers value continuity, so they favour a share sale that keeps contracts, CIS registration, accreditations and bonding inside the company. That preference shapes both the deal structure and your tax position.

The construction diligence traps that decide your price

This is where construction sales are won or lost, and where a general "how to sell a business" guide will not help you. Five sector-specific issues drive the buyer's price and the retention they hold back.

CIS, gross payment status and compliance history

The Construction Industry Scheme sits under almost every construction deal. In a share sale the company keeps its CIS registration and its gross payment status, which is valuable and hard to replace, but the buyer inherits your compliance history. CIS errors, late returns, or verification failures create tax and penalty exposure that transfers with the company, so expect the buyer to review your CIS records in detail and to seek warranties and indemnities over historic compliance. Clean, complete CIS records are not a nice-to-have; they protect your price. The scheme rules are set out in HMRC's guidance on what you must do as a CIS contractor.

Retentions and work in progress

Construction balance sheets carry two contentious assets. Retentions (typically 3 to 5 percent of contract value, held by your customers for 6 to 24 months against defects) are a debtor the buyer will discount for the real risk of non-recovery. Work in progress (work done but not yet certified or billed) is often large and always challenged, because it rests on estimates of stage completion and disputed final accounts. Overstated WIP inflates both profit and the balance sheet, so buyers re-assess every significant contract and apply their own recoverability view. Clean, evidenced, contract-by-contract WIP and retention schedules are among the highest-value things you can prepare before going to market.

Contract novation and change of control

In a share sale the contracting entity does not change, so many contracts continue untouched, but change-of-control clauses in framework agreements, bonds and key contracts can still require notice or consent. In an asset sale, contracts have to be novated one by one, each needing the customer's agreement. Map which contracts carry consent or change-of-control clauses early, because a single objecting client on a major contract can stall completion.

Latent defects and PI run-off

If your business has done design or design-and-build work, defect claims can surface years after practical completion. Professional indemnity run-off cover keeps pre-completion risks insured after the deal, and who pays for it, potentially several years of premium up front, is a genuine negotiating point. Buyers manage latent-defect risk through warranties, indemnities and price retentions, so a clean claims history and settled disputes directly support your number.

Bonding and framework dependence

Performance bonds and surety facilities, granted against the company's balance sheet and track record, are often essential to win public-sector and larger private work. On a change of ownership the surety provider re-assesses, and a weaker buyer or a cash-stripping deal can shrink the facility. Likewise, if one framework or one client provides most of your pipeline, buyers see concentration risk and price it down. Strong, diversified bonding and a spread of frameworks and clients support a higher multiple; heavy dependence on a single source invites a bigger retention.

Share sale or asset sale for a construction business

Most construction sales are share sales, and for a reason: the CIS registration, gross payment status, contracts, accreditations, framework places and bonding facilities all stay inside the company and do not have to be re-procured. The buyer accepts the inherited liabilities in exchange for continuity, managed through warranties, indemnities and due diligence. An asset (or trade) sale is used where a buyer wants specific contracts, plant or the workforce without the history, but then contracts may need novating, consents obtained, and CIS registration does not transfer.

For the seller, the share sale is usually also the more tax-efficient route, because selling the shares in your personal trading company is what opens the door to Business Asset Disposal Relief. The choice between the two exit routes, alongside an EOT or a management buyout, is set out in our guide to selling your business.

Tax when you sell: CGT and BADR at 18%

Sell the shares in your trading company and you pay Capital Gains Tax on the gain. The key reliefs and rates for 2026/27 are:

• Business Asset Disposal Relief (BADR): 18% from 6 April 2026 on the first £1,000,000 of qualifying lifetime gains. That rate rose from 14% in 2025/26 (and 10% before April 2025). To qualify you must have held at least 5% of the shares and voting rights for two years and the company must be trading.
• Above the £1m limit: 24% for higher-rate taxpayers, or 18% within any unused basic-rate band.
• Annual exempt amount: £3,000, deducted before tax.

We do not re-explain the full BADR mechanics here, because we cover them in depth already. For the qualifying conditions, the share-versus-asset distinction and a worked example, see our CGT and BADR on selling your business guide and the BADR fundamentals page. The 14% to 18% rate change and its timing are covered in the BADR 2026 rate change explainer. The current rates and allowances are confirmed on gov.uk's Capital Gains Tax rates page and the Business Asset Disposal Relief guidance, with the technical detail in HMRC's Capital Gains Manual from CG63950.

How the deal is structured changes the tax. Earn-outs, deferred consideration and retention holdbacks (all common in construction because of WIP and defect risk) affect when and how the gain is charged, so the CGT should be modelled before you sign heads of terms, not after. The route-by-route tax comparison, trade sale versus EOT versus winding up, is set out in our tax on selling a business guide.

Could an EOT work for a construction business?

An Employee Ownership Trust lets you sell a controlling interest to a trust that holds the company for the benefit of all employees, funded from future profits. For a contractor with strong, loyal site and project teams and no obvious trade buyer, it can be an attractive phased exit that keeps the business independent. But the tax case has changed, and this is where most guidance you will find online is now wrong.

At the Autumn Budget on 26 November 2025, the Capital Gains Tax relief on a sale to an EOT was cut from 100% to 50%, with immediate effect. Under the new rule, 50% of the gain is your chargeable gain at the point of sale, and the other 50% is held over and bites on the trustees' future disposal of the shares. Crucially, Business Asset Disposal Relief and Investors' Relief cannot be claimed on the taxable half, so it is taxed at the ordinary CGT rate for shares. Guides that still say a sale to an EOT is entirely tax-free were written before 26 November 2025 and are now out of date.

Here is what that means in cash, using consistent figures:

Item	Figure
Sale value (market value to EOT)	£4,000,000
Original base cost	£200,000
Total gain	£3,800,000
Old rule (pre-26 Nov 2025): 100% relieved	£0 CGT at sale
New rule: chargeable now = 50% × £3,800,000	£1,900,000
Less annual exempt amount	£3,000
Taxable now	£1,897,000
CGT rate (BADR/IR not available on this slice)	24%
CGT payable now	£455,280
Remaining 50% (£1,900,000)	latent gain that bites the trustees on a future disposal

Before 26 November 2025 this exit was tax-free. The same sale today triggers roughly £455,000 of CGT and leaves a further £1.9m of latent gain inside the trust. An EOT can still suit the right construction business, but only run the current numbers. The full mechanics are in our EOT tax relief and CGT guide, and the wider case for and against is in the employee ownership trust guide. HMRC's Capital Gains Manual covers the relief from CG67800, and the background to the 2025 change is summarised in the House of Commons Library briefing on Employee ownership trusts (CBP-10437).

Getting a construction business ready to sell

In construction, preparation moves the price more than negotiation does, because the whole deal turns on numbers a buyer can trust. A practical readiness list:

• Evidence your WIP and retentions contract by contract, with a clear view of stage completion and recoverability. This is the first thing diligence attacks.
• Tidy your CIS records and confirm gross payment status is secure. Fix historic errors before a buyer finds them.
• Resolve disputed final accounts where you can. Open disputes are uncertainty, and uncertainty is a price chip.
• Reduce owner dependence. If the business runs on your relationships and estimating, that is key-person risk. A second tier of management supports the multiple.
• Diversify the pipeline. Show recurring maintenance, term and framework work, and reduce reliance on any single client or framework.
• Confirm bonding and PI arrangements and understand how run-off and change-of-control affect them.
• Model the tax early so the deal structure and BADR are optimised before heads of terms.

The full pre-sale and due-diligence framework is in our preparing a business for sale guide.

Talk to us before you go to market

Selling a construction business rewards owners who prepare. The CIS, WIP, retention and PI detail that buyers diligence is exactly the ground where a well-run process holds its value and a rushed one loses it. Our primary help is exit and succession advisory: shaping the sale, weighing a trade sale against an EOT or management buyout, and getting the business ready so it survives due diligence with its price intact.

Alongside that, the accountant work is the tax on exit. Construction sales are full of earn-outs, retentions and deferred consideration that change how and when CGT bites, and BADR at 18% versus the new 50% EOT charge can mean a six-figure difference on the same deal. We will model the CGT and BADR position, and connect you with construction-specialist accounting for the CIS and WIP detail, before you sign anything. Get in touch to book an exit tax review.

This page explains how construction businesses are sold, valued and taxed. It is general information, not advice on your specific position. Arranging the sale of a company by way of its shares is exempt advisory work under Article 70 of the Regulated Activities Order; we do not arrange, source or introduce the finance or investment that funds a buyout, which is regulated credit-broking handled by an authorised commercial finance broker. Always take advice on your own numbers before you act.