Selling Your Company Through a Holding Company or Personally: Which Leaves You Better Off?

Owners preparing for an exit are often told to put a holding company on top of their business. Sometimes that is excellent advice. Sometimes it simply moves the tax problem somewhere else. The right answer depends on one question above all: do you want the sale proceeds in your hands, or in a company?

What the structure looks like

A holding company is a new company that owns the shares in your trading company. Instead of holding the trading company's shares yourself, you own the holding company.

The usual route is a share-for-share exchange. A new company is formed, you transfer your shares in the trading company to it, and it issues you shares in itself in return. If the conditions are met, your gain is deferred, because your new shares are treated as the same asset as your old ones.

The exchange has to be done for genuine commercial reasons and not mainly to avoid tax. That is why many owners apply to HMRC for clearance under section 138 TCGA 1992 first.

Why owners choose it

Keeping what the buyer does not want. Surplus cash and other assets can often be moved up into the holding company before the sale. The buyer acquires a cleaner trading business and you keep the rest.

Using the Substantial Shareholding Exemption. When a holding company sells a trading company, the gain can be exempt from corporation tax. Broadly, the holding company must have held at least 10% of the shares for a continuous 12 months within the six years before the sale, and the company sold must be a trading company or the holding company of a trading group.

Control over the proceeds. With the money sitting in a company, you can reinvest it, back a new venture or draw it out gradually, instead of receiving it all in one go.

What it costs you

Selling through a company is not the same as selling in your own name. Three points matter.

• The cash stays in the company. After an exempt sale, the proceeds belong to the holding company, not to you.
• Getting it out has its own tax. Dividends are taxed as income. A liquidation can sometimes give capital treatment, but anti-avoidance rules can apply, and Business Asset Disposal Relief may not be available on that later step.
• Two layers of tax to manage. The corporation tax you save on the sale only stays saved if the money remains in the company or is extracted efficiently.

What selling personally looks like

By contrast, if you sell your shares yourself:

• You pay capital gains tax once, in the year of completion.
• Business Asset Disposal Relief can give an 18% rate on up to £1 million of lifetime qualifying gains, for disposals from 6 April 2026.
• Gains above that are taxed at 18% or 24%, depending on your other income.
• The cash is yours at once, with no second charge to get it out.

For an owner who wants to spend, gift or invest the money personally, selling in your own name is often the better route. For an owner who plans to reinvest through a company, a holding company can make real sense.

Business Asset Disposal Relief in the new structure

Adding a holding company need not stop you claiming the relief when you later sell the holding company's shares. A holding company of a trading group can pass the trading test. You still need the 5% of shares and votes, a 5% economic entitlement, and to be an officer or employee throughout the two years before the sale.

Cash is the danger. If the holding company builds up large cash balances or investments, the group may stop looking like a trading group. That can damage the relief and the exemption together.

HMRC clearances

Two clearances are commonly considered:

• Section 138 TCGA 1992, confirming that the exchange is for genuine commercial reasons.
• Section 701 ITA 2007, confirming that the transactions in securities rules should not apply. Those rules can turn what would be capital into income.

HMRC responds to the main statutory clearances within 30 days of a complete application. A clearance only covers the facts you disclose, so the application must be full and accurate.

Why timing matters

• The holding period. A holding company inserted shortly before a sale may not have held the shares for long enough to qualify for the exemption.
• Closer scrutiny. HMRC looks harder at restructures carried out with a sale in view.
• Reliefs and stamp duty. Some reliefs are not available once arrangements for a sale are in place, and some stamp duty reliefs can be withdrawn if a sale follows soon afterwards.

If you already have a buyer, a holding company is still possible but riskier. Take advice before heads of terms are signed.

A short checklist

• Decide whether you want the proceeds personally or inside a company.
• Model the after-tax result of both routes, including the cost of extraction later.
• Test trading status and the holding period against your likely sale date.
• Apply for clearance before the exchange, and well ahead of a sale.

Speak to our team

The comparison is rarely obvious without numbers. Our specialists can model both routes for your facts, and the advice is prepared by our specialist team and reviewed by a Chartered Tax Adviser. Book a call with our team before you speak to a buyer and we will help you decide which structure suits you.

This article is general information, not advice. Tax rules change and their effect depends on your circumstances. Please speak to us before acting.

For a closer look at selling or buying a business, see our specialist practice, Transaction Tax Partners.