Exit Tax Planning: Compare the Cash You Keep

Begin with a proceeds model, not a relief

Owners often ask which relief will minimise tax before establishing what the buyer is buying. A share sale, an asset transaction and a staged transfer can produce different company and personal outcomes. Ask your accountant to build a comparison showing the price, transaction costs, relevant liabilities, tax and the amount actually available to you. Keep the assumptions visible rather than compressing everything into one reassuring number.

The model should distinguish completion cash from money payable later. Allow separately for amounts retained against claims, deferred consideration and any earn-out. A larger total price may provide less dependable retirement funding than a smaller amount paid immediately. Your commercial adviser can test payment risk while the tax adviser considers how each element is treated. Neither analysis should be conducted in isolation.

Use current BADR assumptions

Business Asset Disposal Relief is conditional, not an automatic feature of selling a company. For qualifying disposals from 6 April 2026, its rate is 18%; the rate was 14% for qualifying disposals from 6 April 2025 to 5 April 2026. The lifetime limit remains £1 million of qualifying gains. Do not confuse that limit with the total proceeds or with a fresh allowance on each sale.

The main Capital Gains Tax rates are 18% and 24%, but the correct calculation depends on the disposal and your circumstances. Ask your tax adviser to verify the applicable disposal date, ownership history, working role, share rights and any earlier use of relief. An apparently small historic change in ownership or rights may deserve attention before anyone quotes an expected net outcome.

Check the evidence behind eligibility

Collect share records, acquisition details, relevant agreements and previous tax advice early. Where different shareholders expect different treatment, prepare separate calculations rather than assuming everyone shares the founder’s position. Explain any proposed changes to employment, directorships or ownership before implementing them. Tidying a structure without considering the tax consequences can create a problem rather than solve one.

Ask for a written explanation of the conditions relied upon, the records needed and anything that could change the conclusion. This is particularly important if the transaction timetable moves or the consideration changes. Early planning creates time to assess legitimate alternatives; it does not guarantee eligibility or justify making artificial arrangements merely to chase a relief.

Assess employee ownership commercially

Employee ownership deserves consideration where the business, leadership and funding arrangements suit it. Do not select it on the basis of an old claim that every EOT sale is tax-free. For qualifying disposals to an Employee Ownership Trust on or after 26 November 2025, the relief applies to only 50% of the gain; the other 50% is chargeable to Capital Gains Tax. Conditions are strict, not every owner qualifies and an EOT does not guarantee market value. Where EOT relief under section 236H is claimed, Business Asset Disposal Relief and Investors’ Relief are not available on that disposal, including the chargeable gain. Take tax and legal advice on your own circumstances.

The controlling-interest requirements, trustee independence and residence rules introduced from October 2024, and possible clawback need specialist attention. Alongside those matters, test how the purchase will be funded, what cash the trading business needs and who will lead it after you leave. A tax advantage cannot compensate for deferred payments that the business cannot comfortably support.

Review extraction without weakening the deal

Pre-sale dividends, pension contributions and repayment of balances should be reviewed as part of an integrated plan, not treated as interchangeable ways to remove cash. Each can affect your tax position, the company’s resources and the buyer’s price assumptions. Ask what level of working capital the business needs and how surplus cash will be treated in the proposed transaction.

Family transfers and estate planning also need their own analysis. For deaths on or after 6 April 2026, the standard combined allowance for 100% relief on qualifying agricultural and business property is £2.5 million. Unused allowance from a spouse or civil partner can increase it to £5 million. Qualifying property above the available allowance generally receives 50% relief; some property qualifies only for 50% relief even within the allowance. Gifts and trusts have additional rules. Take current advice rather than relying on an older assumption that all qualifying business value is fully relieved. Trusts and gifts are not a substitute for understanding the consequences for each person involved.

Keep the advice connected to the decision

Before signing heads of terms, bring the commercial, tax and personal planning strands together. Identify who owns each assumption and when it will be checked again. Ask what happens if the buyer switches from shares to assets, replaces cash with deferred consideration or requests that you remain employed. Seemingly practical amendments can change the comparison you originally approved.

This is general commercial information, not tax, legal or regulated financial advice. The sensible next step is a confidential discussion with an experienced ExitPlanning.co.uk adviser alongside your qualified tax adviser. Use that discussion to establish feasible routes and a properly evidenced proceeds model, rather than seeking a tax-led structure first and trying to fit the business around it afterwards.