Selling or stepping back from a business is one of the biggest financial moments most owners will ever face. Yet many leave planning too late, then discover that tax, deal structure or a rushed valuation takes a bigger slice than expected. With capital gains tax (CGT) rates now higher and reliefs tightening, tax-efficient exit strategies are no longer a nice-to-have – they are part of protecting what you’ve built.
The wider picture matters too. The UK saw business deaths fall to 280,000 in 2024, but that is still a huge number of owners reaching an endpoint each year (Office for National Statistics (ONS), 2024). If you want control over when and how you exit, rather than reacting to circumstances, you need a clear plan. That plan should cover the form of sale, likely tax reliefs and how to present the business so buyers will pay full value. In this article, we set out the main tax points for tax-efficient exit strategies, the trade-offs between share and asset sales, and the steps we suggest owners take early, while there’s still time to shape the outcome.
Capital gains tax and business asset disposal relief in 2025/26
For most owner-managed businesses, the key tax on exit is CGT. The annual CGT exempt amount remains £3,000 for 2025/26 (HMRC, 2025), so most gains above that will be taxable. From 6 April 2025, the main CGT rates for business assets are 18% for gains in the basic rate band and 24% for gains above it.
Business asset disposal relief (BADR), often central to tax-efficient exit strategies, reduces CGT on qualifying business disposals. For the 2025/26 tax year, BADR applies at 14%, and it is due to rise again to 18% for disposals on or after 6 April 2026 (HMRC, 2025). The lifetime limit for BADR stays at £1m of qualifying gains.
What qualifies is specific, but typical examples include selling shares in your trading company or selling an unincorporated business. Broadly, you must have owned the business for at least two years, and you must meet conditions about your role and shareholding if you are selling shares. If you are unsure whether your business qualifies, checking early matters, because BADR can be lost through changes to ownership, dilution or stepping back from a director or employee role before the sale.
A simple example shows the scale. If you sell shares and realise a £900,000 gain then:
- without BADR part of the gain could be taxed at up to 24%
- with BADR the gain up to the lifetime limit is taxed at 14% in 2025/26.
That difference is meaningful, and it is why so many tax-efficient exit strategies start with confirming BADR eligibility and protecting it right through to completion.
Share sale vs asset sale, why structure drives tax
The structure of the deal can change your tax bill more than almost anything else. Buyers often prefer asset purchases, sellers often prefer share sales and bridging that gap is a big part of exit planning.
Share sale
In a share sale, the buyer buys your shares and takes over the company, including its assets and liabilities. For you as seller, this is usually cleaner and more tax efficient because:
- you pay CGT on the gain on your shares
- BADR may apply if conditions are met
- there is no corporation tax on the sale inside the company.
Asset sale
In an asset sale, the company sells its trade or assets to the buyer. Tax is then typically two-layered.
- The company pays corporation tax on the profit from selling assets.
- You pay income tax or CGT when extracting the after-tax proceeds, often via dividends or liquidation.
That double tax effect means asset sales can be less attractive to sellers, so if a buyer insists on an asset deal, the price or terms often need to compensate for the extra tax cost. This is exactly where early tax-efficient exit strategies give you negotiating room, because you can quantify the tax gap and build it into discussions.
Deal terms that can shift the tax outcome
Even within a chosen structure, the detail matters. Common areas we review with clients include the following.
Earn-outs and deferred consideration: If part of the price is paid later based on performance, you may still be taxed at completion on what HMRC sees as the value now. Getting the earn-out drafted properly can help match tax to cashflow and reduce disputes later.
Working capital and debt adjustments: These can move money between “price for shares” and “repayment of loans”. Loan repayment is not a capital gain, so the mix can affect BADR and CGT in subtle ways.
Business vs non-business assets: Too much cash, investments or property in the company can restrict BADR. Sometimes a pre-sale clean-up or dividend plan is needed to protect relief.
Preparing the business early, valuation and common pitfalls
A strong exit is rarely just about tax. Buyers pay for confidence, and valuation multiples depend on clean records, stable margins and an obvious growth story. Preparing early supports tax-efficient exit strategies because it gives time to fix issues that would otherwise reduce price or increase tax.
We usually suggest owners focus on:
- reliable management information and forecasts
- clear separation of personal and business expenditure
- documented contracts, intellectual property (IP) ownership and key customer dependency
- a plan for staff retention and handover.
Valuation needs attention too. If HMRC later challenges the value you used for CGT, you may face extra tax, interest and penalties. Getting a professional valuation before marketing the business can also help you decide what terms are realistic and whether a staged exit makes sense.
A frequent pitfall is waiting until a buyer is already at the table. At that point, you are dealing with their preferred structure, their timetable, and their due diligence list. Early planning means you can set the pace and keep control of the tax-efficient exit strategies that suit you.
Succession planning and alternatives to a third-party sale
Not every exit is a straight sale to a competitor or investor. For some owners, the best choice is to pass on the business to family, management or employees. Those routes need different tax-efficient exit strategies.
Family succession
Gifting shares or selling at under the value can trigger CGT, but holdover relief may defer CGT when shares in a trading company are gifted. Relief is technical and depends on the business being a qualifying trading company and the recipient being UK resident. Careful sequencing is needed so that you do not create an avoidable tax charge in the process.
It is also important tolso note the direction of travel on inheritance tax (IHT). From 6 April 2026, business property relief is expected to change so that 100% relief applies only to the first £1m of qualifying business property, with 50% thereafter (HMRC, 2025). If family succession is on your horizon, it is worth reviewing plans now, rather than after reforms begin.
Management buyout or employee ownership trust
A management buyout can be a good middle path if you want continuity and a fair price. Employee ownership trusts can still offer a tax-advantaged exit, but following the November 2025 Budget only 50% of the gain on a qualifying disposal is relieved from CGT, with the balance taxed (and not eligible for BADR).
Liquidation and winding up
If you plan a wind-down rather than a sale, members’ voluntary liquidation may allow capital treatment on final distributions, potentially bringing BADR into play. The anti-avoidance rules here are tight, so the rationale and timing need to be clear.
What we suggest you do next
The central message is simple. Tax-efficient exit strategies work best when they start early enough to shape the deal, not just react to it. With BADR at 14% in 2025/26 and due to rise again from April 2026, timing alone can move the tax dial. Add in choices about share versus asset sales, valuation and succession options, and it becomes clear why exit planning is part tax review and part business housekeeping.
If exiting in the next two to five years is even a possibility, we recommend:
- checking BADR eligibility now and protecting it
- reviewing your company’s balance sheet for non-trading assets that could affect relief
- planning how you want to exit – third-party sale, management buyout, family succession or a staged handover.
- getting your reporting, contracts and forecast model into buyer-ready shape.
We help owners design tax-efficient exit strategies that fit their personal goals and the realities of their business. If you want a clear view of your likely tax position and the steps to reduce it, get in touch with us today.