Selling your business? Here’s how you can make the most of it
After years of building your dream business, there may come a time when you’re ready to step away.
Whether you're looking to explore a new venture, spend more time with loved ones, or simply enjoy the financial rewards of your hard work in retirement, this milestone marks the start of a new chapter and also raises several important financial considerations.
From planning your exit strategy to managing tax liabilities and putting the proceeds to good use, having a well-prepared plan can help you make the most of your hard-earned success.
Read on to find out how to make the most of selling your business.
It’s important to have an exit strategy
Having a clear exit strategy in place is crucial to ensuring a smooth transition for both you and your business. It can help you secure your future, reduce potential tax liabilities, and support the ongoing success of the company after your departure.
Your exit strategy might include:
Succession planning – Who will take over the business? Will it be an internal candidate, a family member, or an external buyer? You may need to plan for a transition period where you gradually step back while the new owner settles in.
Tax planning – Understanding the tax implications of selling your business is vital. A financial planner can help ensure you maximise any allowances available to you.
Timing the sale strategically – When you choose to sell can affect everything from tax liabilities to succession logistics. For example, spreading the sale across tax years may help you make better use of personal allowances.
Investment and ownership considerations – Will you retain a minority share in the business? If there are multiple shareholders, reviewing existing agreements and how they affect the sale is key.
Given the complexities involved in creating an exit strategy, it’s a good idea to work with a team of professionals, including a financial planner, solicitor, and accountant.
How to mitigate your tax liability
One of the most important considerations when selling your business is your potential Capital Gains Tax (CGT) liability. This is the tax due on the profit made from the sale, and how much you owe can vary significantly depending on your circumstances and how the sale is structured.
The good news is that several strategies and reliefs are available to help reduce your CGT bill.
Make use of Business Asset Disposal Relief
Business Asset Disposal Relief (BADR) allows you to pay a reduced CGT rate on business and asset sales.
To be eligible, you must:
Be a sole trader or business partner
Have owned the business for at least two years before the date of sale.
If you qualify for BADR, you may benefit from a reduced CGT rate of:
10% on gains up to £1 million if the sale was completed before 6 April 2025
14% for sales made on or after 6 April 2025.
If you don’t meet the criteria for BADR, standard CGT rates apply. The current rates are:
18% for basic-rate taxpayers
24% for higher- and additional-rate taxpayers.
Use CGT allowances and planning strategies
There are also additional allowances and planning opportunities that could help reduce your CGT liability, including:
CGT Annual Exempt Amount – This allows you to make up to £3,000 in gains tax-free each year, with the option to backdate by one year, meaning you could make up to £6,000 in profit. As such, structuring the sale over multiple tax years could allow you to use this exemption more than once.
Spousal Transfers – Transfers of assets between spouses or civil partners are exempt from CGT, which means you may be able to transfer part of your business to your spouse to double your combined Annual Exempt Amount and possibly utilise a lower tax rate.
Offsetting Capital Losses – If you’ve made capital losses in previous tax years, these can be offset against your gains to reduce your CGT bill.
Selling to an Employee Ownership Trust (EOT) – An EOT is a trust that holds shares on behalf of employees. Selling to an EOT can offer significant tax advantages, and if structured correctly, you may pay 0% CGT on the sale.
A financial planner can help you explore these options in the context of your broader financial goals, ensuring the sale remains efficient and supports your long-term security.
Explore different strategies to mitigate Inheritance Tax
Any businesses you own when you die may be eligible for Business Relief (BR) – provided certain requirements are met – which can reduce the IHT liability on qualifying business assets by up to 100%. This relief can be a valuable way to pass on your business or its assets to the next generation without incurring a large tax bill.
Once you’ve sold the business, you are no longer eligible for BR, and the proceeds of the sale will form part of your estate and may become subject to IHT.
However, you may be able to restore BR eligibility by reinvesting the proceeds into a qualifying BR scheme within two years. If held for at least two years and at the time of death, these investments can be exempt from IHT.
You may also want to explore alternative estate planning strategies for mitigating IHT, such as gifting or establishing trusts.
A financial planner can work with you to adapt your estate plan to fit your new situation, ensuring your IHT liability is minimised and your beneficiaries are supported.
How to maximise the proceeds of the sale
Once the deal is done and the sale proceeds reach your account, the next big question is: what will you do with the money?
This is a significant financial turning point as it presents an opportunity to reshape your future on your terms. It’s worth pausing to consider what truly matters to you before making any major financial decisions and assessing your long-term goals and how the sale may influence them.
Whatever your vision, now is the time to revisit your financial plan and map out a strategy that ensures your new wealth supports those ambitions.
Depending on the structure of your sale, you may now have access to a significant amount of liquid capital. To help preserve and grow your wealth tax-efficiently, consider making the most of available allowances and investment wrappers, such as:
Pensions
ISAs
Venture Capital Trusts (VCTs).
A financial planner can help you determine which options best suit your risk profile, time horizon, and estate planning needs.
Get in touch
There’s a lot to consider when selling a business, but you don’t have to go through it all alone.
A financial planner can help you make informed, strategic decisions that maximise the proceeds of your hard work, giving you peace of mind about the continued success of your business and your future.
To speak to a financial planner, get in touch.
Email info@mlpwealth.co.uk or call us on 020 8296 1799.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The Enterprise Initiative Scheme (EIS) and Venture Capital Trusts (VCTs) are higher-risk investments. They are typically suitable for UK-resident taxpayers who are able to tolerate increased levels of risk and are looking to invest for five years or more. Historical or current yields should not be considered a reliable indicator of future returns as they cannot be guaranteed.