Tax Planning Strategies for Business Exits

Selling your business can be one of the most rewarding moments of your career — both financially and personally. However, without proper planning, a significant portion of your hard-earned value can be lost to tax.

Effective tax planning is not about avoidance; it’s about foresight, structure, and timing. By preparing early, you can often reduce liabilities, enhance net proceeds, and ensure a smoother transition.

At ExitPlanning.co.uk, we help business owners prepare for sale in a way that’s both commercially smart and tax-efficient. Here’s an overview of key tax planning strategies to consider when planning your business exit.

1. Start Early — Ideally Years Before You Sell

The best tax outcomes are achieved through early preparation. Leaving planning until you receive an offer can severely limit your options. Ideally, begin reviewing your ownership structure, shareholdings, and personal circumstances 2–3 years before an exit. This allows time to:

• Reorganise share structures

• Review family shareholdings

• Identify available reliefs

• Rectify potential tax issues before due diligence

Early planning gives flexibility and protects against rushed, last-minute decisions.

2. Understand Capital Gains Tax (CGT) on Business Sales

When you sell shares in a limited company, the profit you make is typically subject to Capital Gains Tax (CGT). As of 2025, business owners benefit from several potential reliefs — but these must be planned in advance. Key examples include:

• Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief, allows qualifying shareholders to pay 10% CGT on the first £1 million of lifetime gains (subject to ownership and employment conditions).

• Business Asset Rollover Relief – available when proceeds are reinvested into another qualifying business asset.

• Gift Hold-Over Relief – applies when transferring shares into certain trusts or gifting them to others.

A professional adviser can help confirm which reliefs apply and how to structure your sale to maximise their benefit.

3. Consider Employee Ownership as a Tax-Efficient Option

One of the most powerful tax-efficient exit routes is the Employee Ownership Trust (EOT).

When the majority of shares are sold to an EOT — a trust set up for the benefit of employees — the transaction can qualify for 100% Capital Gains Tax relief.

In other words, you may be able to sell your business completely tax-free, provided the structure meets HMRC’s qualifying conditions. Beyond the tax advantages, an EOT allows owners to:

• Preserve the legacy and independence of the business

• Reward employees directly through tax-free profit shares (up to £3,600 per year per employee)

• Transition ownership gradually and responsibly

At EOT.co.uk, our specialist team helps owners assess feasibility and structure this route effectively.

4. Review How You Extract Value Before Exit

Many owners accumulate significant retained profits in their company before sale. While this can boost valuation, it may also increase personal tax exposure. Consider strategic pre-exit planning such as:

• Pension contributions – tax-efficient extraction of profits before sale

• Dividend planning – balancing distributions with CGT reliefs

• Salary adjustments – aligning personal income with allowances

• Director loan repayments – clearing intercompany balances before completion

The goal is to optimise both your company’s financial profile and your personal position ahead of due diligence.

5. Prepare for Due Diligence and HMRC Scrutiny

Buyers — and HMRC — will scrutinise your accounts, ownership history, and tax compliance. Inconsistent reporting or poor record-keeping can delay or derail a deal. To avoid surprises:

• Ensure tax returns and filings are fully up to date

• Maintain clear documentation for share transactions

• Rectify outstanding HMRC matters before marketing the business

• Confirm eligibility for any reliefs in advance

Clean financials not only support valuation but also inspire buyer confidence.

6. Use Trusts and Family Planning Strategically

If part of your motivation is estate or family planning, trusts can be an effective tool for transferring future value tax-efficiently. Options include:

• Gift Hold-Over Relief when transferring shares into a trust

• Family Investment Companies for controlled intergenerational wealth planning

• Spousal transfers to utilise both CGT allowances before sale

These strategies require careful timing and professional input to avoid unintended tax consequences.

7. Work with Specialist Advisers

M&A tax planning is complex and constantly evolving. Working with experienced corporate finance and tax specialists ensures your strategy is fully aligned with both HMRC requirements and your commercial objectives.

At ExitPlanning.co.uk, we work closely with trusted tax partners to design structured, compliant exit strategies that maximise value and reduce risk — while leaving final advice to your qualified tax advisers.

Tax planning for a business exit isn’t about technicalities; it’s about timing, preparation, and smart structuring. The earlier you plan, the more options you’ll have — and the greater the potential to retain value.

Whether your goal is a full sale, partial exit, or transition to employee ownership, thoughtful planning ensures you reward both yourself and those who helped you build the business.

Next Steps

If you’re considering selling your business in the next few years, start your exit planning conversation today.

At ExitPlanning.co.uk, we’ll help you prepare commercially and connect you with experienced tax professionals to ensure your exit is structured efficiently and successfully.