Tax Planning Strategies to Optimise Your Business Sale

Selling your business is a significant milestone, and effective tax planning is crucial to maximise your net proceeds. In the UK, various tax reliefs and strategies can substantially reduce your tax liabilities upon sale. This guide outlines key considerations to help you navigate the tax landscape and optimise your business exit.​

1. Understand Capital Gains Tax (CGT) Implications

When you sell your business, the profit (or 'gain') you make is typically subject to Capital Gains Tax (CGT). As of April 2025, CGT rates have increased:​

• Basic rate taxpayers: 18%

• Higher and additional rate taxpayers: 24%​

These rates apply to the sale of business assets, including shares in a company. Understanding your CGT liability is the first step in effective tax planning.​

2. Leverage Business Asset Disposal Relief (BADR)

Formerly known as Entrepreneurs' Relief, BADR allows eligible individuals to pay a reduced CGT rate of 10% on qualifying business disposals, up to a lifetime limit of £1 million. To qualify:​

• You must be a sole trader, business partner, or hold at least 5% of shares and voting rights in a 'personal company'.

• You must have owned the business or shares for at least two years before the sale.​

Note: From April 2025, the CGT rate under BADR is set to increase to 14%, and further to 18% in 2026. ​

3. Consider an Employee Ownership Trust (EOT)

Selling your business to an Employee Ownership Trust can offer 100% CGT relief, provided certain conditions are met:​

• The trust must acquire a controlling interest (more than 50%) in the company.

• The company must be a trading company or the principal company of a trading group.

• The trust must operate for the benefit of all employees on equal terms.​

EOTs can be an attractive option for owners seeking a tax-efficient exit while preserving the company's legacy and rewarding employees. ​

4. Explore Management Buyouts (MBOs)

A Management Buyout involves selling the business to its existing management team. While MBOs can facilitate a smooth transition, they may not offer the same tax advantages as EOTs. However, if structured correctly, MBOs can still be tax-efficient, especially if BADR applies. Engaging experienced advisors is essential to navigate the complexities of MBOs.​

5. Timing the Sale Strategically

The timing of your business sale can significantly impact your tax liability:​

• Tax Year Planning: Selling at the beginning of a tax year may provide more time to plan and utilise allowances.

• Income Considerations: If your income varies, choosing a year with lower income can reduce your overall tax rate.​

Consulting with a tax advisor can help identify the optimal timing for your sale. ​

6. Utilise Pension Contributions

Making pension contributions before the sale can reduce your taxable income, potentially lowering your CGT liability. Company contributions to your pension scheme are also deductible expenses, reducing the company's taxable profits. However, excessive contributions may affect the business's valuation, so balance is key.

7. Offset Gains with Losses

If you have incurred capital losses in the same or previous tax years, these can be offset against the gains from your business sale, reducing your CGT liability. Ensure all losses are properly documented and reported to HMRC.​

8. Consider Asset vs. Share Sale

Selling shares in your company is generally more tax-efficient than selling individual assets, as it may qualify for BADR and avoids double taxation. However, buyers may prefer asset purchases to avoid inheriting potential liabilities.Negotiating the sale structure requires careful consideration and professional advice.​

9. Plan for Inheritance Tax (IHT)

If you plan to pass your business to heirs, consider the IHT implications:​

• Business Property Relief (BPR): Provides up to 100% relief from IHT on qualifying business assets.

• Trusts: Placing business assets in a trust can offer control and potential tax benefits.​

Recent changes have reduced BPR to 50% for certain assets from April 2026, making early planning essential. ​

10. Seek Professional Advice Early

Tax laws are complex and subject to change. Engaging with experienced tax advisors, accountants, and legal professionals well in advance of your planned sale ensures that you can:​

• Identify and maximise available reliefs.

• Structure the sale for optimal tax efficiency.

• Comply with all legal and regulatory requirements.​

  
  

Effective tax planning is integral to maximising the proceeds from your business sale. By understanding the available reliefs, considering the timing and structure of your sale, and seeking professional advice, you can navigate the complexities of tax legislation and secure a financially rewarding exit.

Ready to Plan Your Exit?

At Exits.co.uk, we specialise in guiding UK business owners through successful sales. Our team of experts can help you navigate the tax landscape, identify the best exit strategy, and connect you with qualified buyers.​

Book a confidential consultation today to start planning your tax-efficient business exit.