Thinking of Selling Your Business? Tax Planning and Exit Considerations
Owner-managed business directors considering a future exit, shareholders exploring partial disposals, and entrepreneurs preparing for retirement or succession.
Why early tax planning is critical when selling a business, how Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR) affect net proceeds, and the structural difference between share sales and asset sales.
Exit planning is rarely just commercial. The structure and timing of a sale can materially affect your after-tax position. Late-stage tax planning can result in loss of reliefs, higher CGT liabilities, and reduced net proceeds after months of negotiation.
Why Early Tax Planning Is Critical
Tax should be considered before marketing the business or entering negotiations. Once heads of terms are agreed, flexibility is often limited.
Early planning allows you to:
- Confirm eligibility for Business Asset Disposal Relief
- Review shareholding structures
- Address potential non-trading activities that may affect relief availability
- Plan timing of disposal for optimal tax efficiency
Proactive review protects value rather than attempting to correct issues once the deal is structured.
When You Can Claim the 10% CGT Rate on Disposal
Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. When the relief if available, Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. This can mean a substantial CGT saving for someone looking to exit from their business.
There are a number of qualifying conditions that must be met in order to qualify for the relief. BADR used to be known as Entrepreneurs’ Relief before 6 April 2020. The name change did not affect the operation of the relief.
You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.
The deadline for claiming relief is as follows:
| Tax year when you sold or closed your business | Deadline to claim BADR |
| 2022-23 | 31 January 2025 |
| 2023-24 | 31 January 2026 |
| 2024-25 | 31 January 2027 |
How CGT and BADR Affect Net Proceeds
When selling shares in a company, any gain is generally subject to Capital Gains Tax. The applicable rate depends on:
- Eligibility for Business Asset Disposal Relief
- Whether qualifying conditions have been met for the required period
- The overall structure of the transaction
If BADR applies, the CGT rate may be reduced. If it does not, the gain will be taxed at standard CGT rates. The difference can significantly impact your final net proceeds.
Share Sale vs Asset Sale
Buyers and sellers often have different preferences when structuring a transaction.
Share Sale
- The buyer acquires shares in the company.
- The seller is taxed personally on the capital gain.
- BADR may be available if conditions are satisfied.
Asset Sale
- The company sells its assets.
- The company may pay Corporation Tax on gains.
- Further tax may arise when proceeds are extracted.
The structural choice can materially change the tax outcome, even if the headline price is identical.
Risks of Late-Stage Tax Planning
Leaving tax considerations until after negotiations begin can lead to:
- Loss of BADR eligibility
- Unexpected higher CGT liabilities
- Reduced net proceeds after extended commercial negotiations
These risks are avoidable with structured planning before formal agreements are reached.
Real-World Exit Stages Where Planning Matters
- Informal buyer discussions: Before valuation expectations are locked in.
- Preparing financial records: Reviewing trading status and asset composition.
- Relief eligibility review: Confirming BADR conditions are satisfied before disposal.
Each of these stages presents an opportunity to optimise tax treatment rather than react to constraints later.
Considering a Sale? Review Your Exit Strategy First
Selling your business is one of the most significant financial decisions you will make, and poor preparation can lead to unnecessary tax liabilities or reduced deal value. Cigma Accounting works with business owners across London to structure disposals efficiently, assess reliefs, and ensure negotiations are backed by clear financial insight, guided by an experienced tax accountant in London.
From our Farringdon, supporting clients in Bank and Moorgate, we align exit planning with your wider personal and corporate tax position rather than treating the sale in isolation. With physical offices across London, our team provides strategic, hands-on support through trusted accounting services London expertise to help you approach a sale with confidence and control.
CONSIDERING AN EXIT AND WANT TO PROTECT YOUR NET PROCEEDS?
Selling a business involves more than agreeing a price. Tax structuring, relief eligibility, and timing can significantly affect what you ultimately retain. Early, informed planning can help you avoid preventable tax costs and strengthen your negotiating position.
Trusted guidance from London-based accountants, focused on accuracy, clarity, and compliance.
