Selling your business: the tax and exit planning guide for owners

The quick answer

Selling a business worth £5m or more is usually the largest tax event of an owner's life. On a share sale you pay capital gains tax at 18% or 24%, with Business Asset Disposal Relief taxing up to £1m of lifetime gains at 18% from 6 April 2026. The route you choose, the way the price is paid, whether a holding company sells, and where you live when the contract becomes unconditional can all change the tax by far more than the relief does.

After the sale, a different problem starts. Shares in a trading company usually qualify for Business Relief from inheritance tax. Cash does not. Without a plan, the proceeds can face 40% inheritance tax on top of the capital gains tax you have just paid.

This page is our hub for owners planning an exit in the next one to five years. It sets out what to do and when, compares the sale routes, explains each tax in plain English and links to our detailed pages, calculators and our free first call.

Your exit timeline: what to do and when

Most of the tax result is fixed long before a buyer appears. Here is the order we work in with owners.

Three years before

• Decide what you want from the exit: a full sale, a partial sale to private equity, a handover to management or employees, or a transfer to family.
• Check who owns the shares, and whether each shareholder meets the conditions for Business Asset Disposal Relief.
• Look at surplus cash, investments and property in the company. Large non-trading assets can threaten trading status, which several reliefs depend on.
• Consider whether a holding company or a demerger is needed, for example to separate property you want to keep. These need time and usually an HMRC clearance.

Two years before

• The relief clock is running. Business Asset Disposal Relief looks at the two years ending on the date of sale, so roles, shareholdings and trading status should be right from now on.
• Make any planned gifts of shares to a spouse or family while the shares still qualify for Business Relief and before any sale is in sight.
• Tidy director loan accounts, close open HMRC points and review past claims, such as R&D, that a buyer will examine.

Twelve months before

• Model the routes on real numbers with our Business Exit Calculator.
• If a holding company will sell a subsidiary, check it will have held the shares for at least 12 months by the sale date.
• Agree your own plans for residence. If you might move abroad, the timing has to be settled now, not after heads of terms.

Six months before

• Prepare for due diligence by reviewing your own tax position first. Problems found by a buyer usually become price cuts or indemnities.
• Shape the price: how much is cash at completion, how much is deferred, and whether any of it is an earn-out, shares or loan notes.
• Apply for HMRC clearances where the deal includes shares, loan notes or a restructuring.

The sale

• Check the tax wording of heads of terms, the sale agreement and the disclosure letter, including warranties and the tax covenant.
• Make sure any elections to protect relief on loan notes or shares are diarised.
• Remember that for capital gains tax the date of disposal is normally the date the contract becomes unconditional, not completion.

After the sale

• Report the gain and claim Business Asset Disposal Relief by the deadline: for a sale in 2026/27, by 31 January 2029, and pay the tax by 31 January 2028.
• Put the inheritance tax plan for the proceeds into action, ideally already agreed before completion.
• Track deferred payments and earn-outs, which can create further tax years later.

For a fuller checklist, see our exit planning page.

Sale routes compared

The same business can be sold in very different ways, and each is taxed differently.

Our pages on management buy-outs, Employee Ownership Trusts and succession and retirement planning go into each route in depth. Our Transaction Tax overview covers the deal work.

The taxes on a sale, explained

Capital gains tax and Business Asset Disposal Relief

When you sell shares personally, the gain is the price less what the shares cost you. Capital gains tax is charged at 18% on gains within your basic rate band and 24% above it, after a £3,000 annual exempt amount.

Business Asset Disposal Relief reduces the rate to 18% on up to £1m of qualifying gains over your lifetime. The rate was 10% before 6 April 2025 and 14% for 2025/26. For a share sale, throughout the two years before the sale:

• the company must be a trading company, or the holding company of a trading group;
• you must be an officer or employee of the company or a group company; and
• you must hold at least 5% of the ordinary shares and votes, and be entitled to at least 5% of the profits and assets or of the sale proceeds. Shares from EMI options have different rules.

At an 18% rate the relief saves at most £60,000 per person compared with 24%. On a £10m sale, the structure, route and timing usually matter more than the relief itself. Our page on selling a business covers the relief in detail.

Share sale or asset sale

On a share sale, the buyer takes the company with its history, and you pay capital gains tax once. On an asset sale, the company sells its trade and assets, pays corporation tax on the gains (the main rate is 25%), and you then pay tax again when the cash reaches you, as a dividend or a distribution on liquidation. Buyers often prefer assets because they leave the company's past behind and may get tax relief on what they buy. Knowing the tax gap on both sides helps you negotiate the price.

Earn-outs, deferred consideration and loan notes

How the price is paid can change when, and how much, tax you pay:

• Fixed deferred payments are usually taxed as part of the gain in the year of sale, even though you have not been paid. Where payments run for more than 18 months, the tax can sometimes be paid in instalments.
• Cash earn-outs of an unknown amount are valued at completion and taxed then. Later payments are compared with that value, and any further gain is a separate disposal that does not qualify for Business Asset Disposal Relief.
• Earn-outs linked to you staying on can be taxed as employment income rather than as a gain.
• Shares and loan notes issued by the buyer can usually defer the gain. If you want Business Asset Disposal Relief on that part, an election under section 169Q (shares and non-qualifying loan notes) or section 169R (qualifying corporate bonds) lets you claim it at the exchange date. The deadline is the same as for the relief claim.

Our article on how earn-outs, loan notes and deferred payments are taxed works through each case.

Selling through a holding company: the substantial shareholding exemption

Where a company sells shares in a trading subsidiary, the substantial shareholding exemption can make the gain exempt from corporation tax. The selling company must have held at least 10% of the shares, with at least 10% of the profits and assets, throughout a 12-month period beginning not more than six years before the sale, and the company being sold must be a trading company or the holding company of a trading group.

The cash then sits in the holding company. That can be very useful if you want to reinvest, but taking it out personally is taxed separately, so the plan should cover both steps. We compare the two in selling a subsidiary or the whole group.

Pre-sale restructuring and inserting a holding company

Many owners need to restructure before a sale: to separate property or a second business, to bring in a holding company, or to tidy share classes. A share-for-share exchange into a new holding company can normally be made without a capital gains tax charge, and HMRC can confirm this in advance.

Timing is critical. For shares issued on or after 26 November 2025, the relief can be denied where a main purpose of the arrangements is to secure a tax advantage. A holding company inserted shortly before an agreed sale is exactly what HMRC looks at. A restructure done two or three years ahead, for genuine commercial reasons, is far stronger. Our sister practice explains the steps in its guide to pre-sale restructuring.

HMRC clearances

Clearances give certainty before you commit. The ones most often used on a sale are:

• section 138 TCGA 1992, for share exchanges and reorganisations;
• section 701 ITA 2007, for transactions in securities, where HMRC could otherwise treat capital receipts as income;
• section 1044 CTA 2010, for a company buying back its own shares; and
• section 1091 CTA 2010, for demergers.

HMRC must respond to these statutory clearances within 30 days of receiving a complete application, although it can ask for more information first. We plan clearance timing into the deal timetable so it does not hold up completion.

Inheritance tax on the proceeds

While you own shares in an unquoted trading company for at least two years, they usually qualify for Business Relief. From 6 April 2026, 100% relief applies to the first £2.5m of qualifying business and agricultural property per person, with 50% relief above that. Unused allowance can pass to a surviving spouse or civil partner.

Two things change on a sale. First, once a binding contract for sale is signed, the shares normally stop qualifying, unless the sale is for shares in a new company as part of a reconstruction. Second, the cash you receive does not qualify at all. A £10m sale can leave an estate facing inheritance tax at 40% above the nil-rate band of £325,000. Gifts of shares made before any contract, while relief still applies, are often among the most valuable planning steps. Our inheritance tax planning page and Inheritance Tax Calculator show what is at stake.

Moving abroad before a sale

Some owners plan to leave the UK before selling. It can work, but the rules are strict:

• You must be non-UK resident under the Statutory Residence Test when the contract becomes unconditional, which is when the disposal happens. Check your position with our UK Residency Checker.
• Under the temporary non-residence rules, if you had sole UK residence in at least four of the seven tax years before you left and you return within five years, gains on assets you owned when you left are taxed in the year you come back. Certain dividends from close companies can be caught in the same way.
• Inheritance tax now depends on long-term UK residence. If you were UK resident for at least 10 of the previous 20 tax years, your worldwide estate can stay within UK inheritance tax for three to ten years after you leave.
• The tax of the country you move to matters as much as the UK rules.

Our leaving the UK page covers the move itself.

After the sale: protecting what you keep

Planning for the proceeds should start before completion, because some of the best options, such as gifts of shares while Business Relief still applies, close when the contract is signed.

• A Family Investment Company. A private company, owned by you and your family, that holds and invests the proceeds. You can keep control through voting shares while future growth builds up in your children's shares, outside your estate. Our Family Investment Company page explains how it is funded, and our sister practice has a guide to Family Investment Companies for business owners.
• Keeping the cash in a holding company. Where a holding company sells a subsidiary under the substantial shareholding exemption, the proceeds can be reinvested by that company without first being taxed on you personally. It then becomes an investment company, with its own tax rules and no Business Relief on the cash.
• Gifts and trusts. Outright gifts can fall outside your estate after seven years. Trusts give control but have their own inheritance tax charges above the nil-rate band.
• Your own needs first. We plan around the income and capital you need, so that nothing given away leaves you short.

Tools and further reading

• Business Exit Calculator: compare what you keep from a trade sale, MBO or Employee Ownership Trust.
• Inheritance Tax Calculator: see the inheritance tax on your estate before and after a sale.
• UK Residency Checker: work through the Statutory Residence Test.
• Trade sale, private equity, MBO or EOT: how each exit route is taxed.
• Inheritance tax when you sell your company and Business Relief is lost.
• Client results: an accountancy firm's sale to private equity and separating property from a £15m construction group ahead of a sale.

For the full detail on deal structures, warranties and the sale process, our specialist transaction practice has a complete guide to tax on selling a business.

How we help

We are Chartered Tax Advisers, and business sales are a core part of our work: from the first conversation about an exit three years out, through the restructuring and clearances, to the deal itself and the plan for the proceeds. Your advice is prepared by our specialist team and reviewed by a Chartered Tax Adviser, and you deal with the same people throughout.

The first call is free and there is no obligation. Book a call and tell us where you are in the timeline. We reply the same working day.