Selling a business: tax planning to keep more of the proceeds

On a share sale you pay capital gains tax on the gain. For 2026/27 the main rates are 18% within the basic rate band and 24% above it. If you qualify for Business Asset Disposal Relief, the first £1m of gains over your lifetime is taxed at 18%. There is also a £3,000 annual exempt amount. The result depends on your cost, holding and the terms of the price.

For 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, and you must hold at least 5% of the ordinary shares with at least 5% of the votes and 5% economic entitlement. EMI shares are exempt from the 5% test. Missing a single condition means the 18% rate is not available.

Only if you were still an officer or employee at the right time. The conditions must be met throughout the two years ending on the date of sale. If you resign as a director early, you can lose the relief. It is a common and costly mistake, so check your role and the sale date before you step back.

You claim it on your tax return or through a separate claim form. The deadline is the first anniversary of 31 January after the end of the tax year of the sale. So for a sale in 2026/27, the claim must be made by 31 January 2029. Do not wait: claiming on time protects the relief and the cash flow.

An earn-out is a deferred part of the price that depends on future performance. For a cash earn-out of an uncertain amount, the right to the payment is valued at completion and taxed as part of the gain then. Later payments are compared with that value. If the earn-out is linked to you continuing to work, it can be taxed as employment income instead.

Fixed deferred consideration is normally part of your proceeds in the year of sale, even though you have not yet been paid. If the deferred payments run for more than 18 months, you can sometimes arrange to pay the tax in instalments, up to the earlier of the last payment date and eight years. HMRC normally expects 50% of each instalment of the price to go toward the tax.

A share-for-share exchange can defer the gain, so you pay tax only when you later sell the new shares. Loan notes can also defer gains, but their terms matter, for example whether they are qualifying corporate bonds. Where relief is wanted, a statutory clearance can confirm HMRC accepts the exchange is not tax avoidance, and elections can sometimes preserve Business Asset Disposal Relief.

Not always, but they can be valuable. Clearances exist for share exchanges and reorganisations, transactions in securities and company purchases of own shares, among others. HMRC must respond to the main ones within 30 days of a complete application. We apply when the transaction has a risk of being challenged, and when the certainty outweighs the time.

As early as you can, and ideally two to three years ahead. Relief conditions run for two years, so a holding company or a share restructure done in the last six months may not be effective. Removing surplus cash and non-trading assets, tidying the shareholdings and setting the right roles all take time.

Sometimes. Surplus cash can be paid out as dividends or left for the buyer to pay for, and the answer depends on your dividend rates, your relief position and how the deal is priced. Dividends in 2026/27 are taxed at 10.75%, 35.75% or 39.35% above a £500 allowance, so the comparison with capital gains tax is a real one.

In a share sale you pay one layer of tax on your gain, with reliefs available. In an asset sale the company is taxed on its gains, then you are taxed again when you take the proceeds out, whether as dividends or on winding up. That is why sellers usually prefer a share sale, and why the price can differ.

Warranties and indemnities make you personally liable for tax problems that surface after completion, sometimes for four to seven years. We negotiate limits on time and amount, exclusions for matters already disclosed, and caps tied to the price. We also consider warranty and indemnity insurance, which can move the risk off you in some deals.

Business Relief can make shares in a trading company free of inheritance tax, up to 100% on the first £2.5m of qualifying property per person from 6 April 2026. Once you sign a binding contract to sell for cash, the relief is usually lost, and the cash is exposed to 40%. Planning for this before the sale is far more effective than after.

It can work, but it needs care. A gift to a spouse can use two sets of allowances and rates, and gifts to children can start the inheritance tax clock. A gift to children is itself a disposal at market value for capital gains tax, although gift holdover relief may be available on trading company shares. The gift must be real, unconditional and made well before a deal is in sight, and the anti-avoidance rules need checking. Late gifts risk challenge.

Moving abroad does not automatically remove the UK tax. Under the temporary non-residence rules, gains on assets held before you leave can be taxed on your return if you were non-resident for five years or less. Selling before you leave, or signing an unconditional contract before you become non-resident, can leave the gain taxable here.

It can exempt a gain on a sale of shares by a company, so no corporation tax is due on the gain. The seller must have held at least 10% 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. This is why a holding company structure is often useful.

It is worth deciding before the deal completes. Options include keeping cash in a holding company, investing through a Family Investment Company, funding pensions, making gifts or setting up trusts. Each has different tax and control consequences. The proceeds are usually the largest asset in your estate, so planning pays off quickly.

Usually yes. Corporate finance advisers focus on finding a buyer and negotiating the price and headline terms. They typically do not model the after-tax outcome, protect your reliefs or negotiate the tax terms of the sale agreement. Working together, we can show you what each offer is really worth to you after tax.