Selling a business is a big decision. The right tax-efficient exit plan can protect value, smooth the deal and set you up for what comes next. It matters now because buyers remain selective and HMRC scrutiny is rising. The annual capital gains tax (CGT) exemption is £3,000 in 2025/26, so more of a seller’s gain can be taxed unless reliefs apply (HMRC, 2025). At the same time, the Office for Budget Responsibility (OBR) expects CGT to raise £19.7bn in 2025/26 – a reminder that planning, documentation and reporting need to be watertight (OBR, 2025). Finally, small and medium-sized enterprises (SMEs) dominate the economy – 5.5m private-sector businesses at the start of 2024 – so robust owner exit planning remains a mainstream need, not a niche exercise.
In short, a tax-efficient exit takes time. We help clients weigh up routes – asset sale, share sale, management buyout, family succession or a company purchase of own shares – against price, risk, tax and post-deal goals. Below, we outline the options, the reliefs and the practical steps to keep deals moving and tax risk low.
Choosing the right route
Each path has different tax, legal and commercial outcomes. We model the numbers, the cashflow and the risk profile before you choose.
- Share sale: Buyer acquires the company’s shares. Sellers typically access business asset disposal relief (BADR) at 10% on qualifying gains up to the £1m lifetime limit, provided conditions are met (HMRC, 2025). Buyers inherit historic liabilities, so warranties and indemnities are tighter.
- Asset sale: Company sells trade and assets. The company pays corporation tax on any gains and proceeds are then distributed to owners. This can cost more overall compared with a share sale. Buyers like the clean slate.
- Management buyout (MBO): The team buys the company, often supported by debt or private capital. Valuations and bankability drive structure. Keeping key people motivated pre- and post-completion is as important as the tax.
- Family succession: Transfers can be structured over time using gifts and sales, often with voting control retained for a period. We consider CGT, inheritance tax (IHT) and cash needs of the exiting generation.
- Company purchase of own shares (CPOS): The company buys back an owner’s shares. With the right conditions, the proceeds can be taxed as capital rather than income and HMRC advance clearance is available (HMRC, 2021). Timing, distributable reserves and the “benefit of the trade” test are essential.
For advice tailored to your situation, explore our dedicated corporate finance services and speak to our tax services team.
Reliefs and rates that shape a tax-efficient exit
Reliefs and rates change the net outcome, so we build them into early conversations.
- Business asset disposal relief (BADR): 10% CGT on qualifying gains up to a £1m lifetime cap. You normally need to be an employee or office holder, and hold at least 5% of ordinary share capital and voting rights in a trading company for the two years up to disposal; special rules help where shares arise from qualifying enterprise management incentives (EMI) options.
- CGT rates and allowance: For 2025/26, the annual exempt amount is £3,000 (£1,500 for most trusts) and the main CGT rates on most assets are 18% and 24% depending on your income band. BADR keeps its separate 10% rate for qualifying gains.
- EMI options: Properly granted and managed EMI can deliver BADR without the usual 5% tests, and time from grant often counts towards the two-year holding period. Keep grant paperwork, valuations and working-time declarations tidy to preserve reliefs.
- Company purchase of own shares: Capital treatment can apply if statutory tests are met and clearance is recommended before completion.
Structuring for value: Shares, assets and goodwill
Preparation reduces price chips and keeps tax exposure contained.
- Pre-sale restructuring: Remove non-core assets or ring-fence property. Share classes – align economic rights, resolve preference shares that block BADR. Debt – efinance or settle related-party balances to avoid completion spats.
- Goodwill and intellectual property (IP): Maintain reports supporting goodwill, brand and technology values. Earn-outs – structure earn-outs with clear key performance indicators (KPIs) and anti-avoidance awareness, because deferred consideration can trigger tax at different times. We help model scenarios and secure HMRC clearances where appropriate.
- Working capital: Agree a clear working-capital target to reduce completion adjustments and disputes. Clean debt and cash definitions are vital.
Management teams, EMI and buyer incentives
Keeping key people motivated often makes or breaks a tax-efficient exit.
- Option pools and EMI: Check terms. Confirm that vesting, leaver provisions and exercise windows work with transaction mechanics. Tax checkpoints: EMI exercises close to completion can create “readily convertible asset” issues and PAYE withholding; plan cashflows so employees are not out of pocket at completion.
- Buyer incentives: Rollover stakes. Sellers sometimes reinvest in a new spin-off company – understand securities restrictions, dilution and future exit terms. Retention packages will align management incentives with business plan milestones post-deal.
Due diligence, SPA protection and HMRC clearances
Get the paperwork right and keep momentum.
- Due diligence pack: Financials include three years of signed accounts, current-year management information, tax computations and returns. Tax documentation should include evidence of compliance on VAT, PAYE, research and development (R&D), employment status and share schemes. Clean files reduce price chips and protect BADR.
- Warranties and indemnities: Limit unknown risks with warranties; use specific indemnities for identified issues. High-quality disclosure letters support warranty defence and keep trust with buyers.
- Sale and purchase agreement (SPA): The consideration mechanics are cash, shares, loan notes and earn-outs – each drive different tax timings. With covenants, non-compete and consultancy terms affect employment taxes – keep them proportionate.
- HMRC clearances: For CPOS capital treatment, seek advance clearance for company buy-backs. Transactions in securities – where relevant, obtain anti-avoidance clearances on complex re-organisations to reduce post-deal uncertainty.
Protecting the family: CGT, IHT and succession
Plan early to keep family wealth intact and your tax-efficient exit on track.
- CGT planning: Consider transfers to a spouse or civil partner before exchange to use allowances and rate bands. Document market value and timing.
- IHT planning: If an exit removes business relief eligibility, revisit wills and life cover. Use trusts or staged gifts where appropriate, with attention to seven-year rules and reservation of benefit.
- Pension and ISA wrappers: Pension contributions and ISA funding can improve net outcomes post-sale. We can coordinate with your wealth adviser.
Summing it up
A well-planned tax-efficient exit protects your legacy, reduces tax leakage and sets up the next chapter with fewer risks. Reliefs like BADR at 10% can be valuable, but only if eligibility is built into the plan and evidenced. Allowances are tighter in 2025/26, with the CGT exemption at £3,000, so unplanned disposals can cost more than expected. Add in the OBR’s expectation of higher CGT receipts and buyer-side diligence, and the case for early preparation is clear. Our corporate finance and tax specialists will map options, model after-tax proceeds, prepare files for diligence and handle HMRC clearances to keep your tax-efficient exit moving.
If you are starting to think about a tax-efficient exit, contact us. Explore our corporate finance services or speak to our tax services team. We will give you straight answers, a clear plan and hands-on support from heads of terms to completion.
