How to make the most of selling your business

When you sell your business, it’s important to have an exit strategy that outlines how you’ll transition the ownership, secure your future, and help ensure the continued success of the business.

Your exit strategy should be established well before you sell your business, so that when the time comes, you’re executing a well-considered plan rather than creating one on the spot.

Your strategy might include:

• Succession planning – Who will be running your business once you sell it? Will it be someone who already works there, a family member, or an outside party? Will they need time to transition into their new role while you take a backseat, and if so, how long?
• Tax planning – Are you familiar with the taxes you’ll have to pay after selling the business, as well as any reliefs you may be eligible for?
• Timing – When you sell your business can influence your tax liabilities, succession plans, and future opportunities. For example, selling the business in instalments rather than a single exchange might mean you can benefit from multiple allowances spread over different tax years.
• Investment considerations – Will you still hold a minority share in the business? If your business has more than one owner, it’s also important to review any shareholder agreements in place.

When planning and executing an exit strategy for your business, it’s a good idea to work with a joined-up team of financial planners, solicitors, and accountants to ensure all the moving parts are considered as a whole and are handled as smoothly and efficiently as possible.

When it comes to selling your business, your Capital Gains Tax (CGT) liability is one of the main things you need to get right. It’s the tax you pay on the profit you make from the sale, and how much you end up owing can vary quite a bit depending on your circumstances.

The good news is that there are several ways you can reduce your bill.

If you qualify for Business Asset Disposal Relief (BADR), you pay a reduced rate of 14% (10% if sold before 5 April 2025) CGT on up to £1 million of lifetime gains. To be eligible for BADR you must:

• Be a sole trader or business partner
• Have owned the business for at least 2 years.

If you don’t qualify for BADR, you’ll be charged the regular rate of CGT on the profits, which are:

• 18% for basic-rate taxpayers
• 24% for higher- and additional-rate taxpayers.

There are other CGT allowances you may be eligible for, including:

• CGT Annual Exempt Amount allows you to make up to £3,000 in profit each year before you pay tax. Spreading your sale over a period of time could help you make use of this allowance, as you may be able to use multiple years’ allowances. You can also offset losses against gains to reduce your CGT bill.
• Spousal transfers are exempt from CGT, so it could be worth transferring a portion of your business to your spouse to double your total Annual Exempt Amount.
• Employee Ownership Trusts (EOTs) are a type of trust that holds shares of a company on behalf of all its employees, essentially providing them with indirect ownership. If you sell your business to an EOT, you pay 0% CGT.

A financial planner can help you make the most of these allowances and understand how they fit in with your wider financial plan.

If your business is family-owned, there may be some additional considerations, particularly when it comes to Inheritance Tax (IHT).

For example, when you own a business, you may be eligible for Business Relief (BR). This can reduce the IHT liability on your business and certain assets by up to 100% and could help you pass on more to your loved ones.

However, once you sell your business, you are no longer eligible for BR. So, what can you do?

One option is to gift some of the business’s assets to your beneficiaries before the sale, which may allow you to make use of gifting exemptions and allowances. There may also be certain trusts that could be useful to transfer assets into, which could help ensure your sale and estate remain efficient.

A financial planner can help you weigh up your options and build an exit plan that’s aligned with your family goals.

Once you’ve sold your business, the next big question is: what are you going to do with the proceeds? This is your opportunity to reshape your future, so it’s worth taking the time to think carefully about what comes next.

Start by revisiting your life goals. Do you want to use the money to retire early, start something new, or support your children and grandchildren? You may also want to pay off any outstanding debts you have, such as your mortgage. Whatever you want to do, this is a great time to map out what matters most, revisit your financial plan, and ensure you have enough to achieve your goals.

Depending on how you made the sale, you may now have a significant amount of liquid wealth. So, you should make sure you’re making the most of your tax-efficient wrappers, such as pensions, ISAs, and even specialised options like Venture Capital Trusts (VCTs).

You might also want to revisit your portfolio and make further investments or make changes to your estate plan to help provide for your future beneficiaries.

As you can see, there’s a lot to think about when selling your business, but you don’t have to figure it all out on your own.

An Amber River financial planner can help you make informed, strategic decisions that align with your goals. They can play a key role in a wider team of professionals that can help ensure you make the most out of your hard work and success.