Navigating the tax landscape
when selling your business 

Selling your business is a big decision that comes with many moving parts. One of the most important things to consider is how the sale will impact your taxes. In this blog, we’ll walk you through some key questions and tips to help you estimate and manage the tax side of things.

Estimating what you’ll take home: Maximising value and managing taxes

When selling your business, it’s crucial to know how much you’ll actually pocket after the deal. Two key factors affect this: boosting your business’s value and managing the taxes on your sale proceeds. Working with an adviser can be a game-changer. Their experience and insights can help you get the most value out of your business while keeping your tax burden as low as possible. Book a call with one of our tax specialists if you’d like to learn more.

Understanding the tax impact: Share sale vs. trade and asset sale

The way your deal is structured—whether it’s a share sale or a trade and asset sale—will significantly impact your taxes.

• Share sale: This is typically taxed as a capital gain, with rates of 18% or 24%, depending on your income. If you qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), the tax rate on the first £1 million of the sale could be reduced to 10% (14% from April 2025 and 18% from April 2026).
• Trade and asset sale: This can result in double taxation. First, the gain is taxed at the corporate level (19%-25%). Then, shareholders are taxed again when they take the proceeds out through dividends or capital gains.

Choosing the best structure: Share sale or trade and asset sale?

While a share sale is usually more tax-friendly for sellers, buyers might prefer a trade and asset sale. This option allows buyers to avoid taking on any old liabilities tied to the company, making the purchase cleaner and simpler.

Timing your tax payments and earn-out considerations

When you sell shares, you typically report the tax in the year the deal closes. If your deal includes an earn-out (where you get paid in instalments), be aware that the deferred amounts might be taxed upfront—even before you receive all the payments.

Smart financial moves before the sale

Some sellers consider reducing the amount that they take from the business before the sale. For example, reducing dividends beforehand can allow you to build up cash reserves, which can be added to the sale amount. This might result in a lower tax rate than if you took the money out as dividends or salary.

Start planning early: Property and restructuring considerations

Start planning for your sale as early as possible. This includes thinking about not just profit and value, but also the tax implications. You might want to explore options like restructuring shares or demerging assets well in advance to make the deal more tax-efficient.

Selling your business is an exciting but complex journey. There are multiple exit routes available, as discussed in this blog. Getting professional advice early on is crucial to maximising your proceeds and ensuring everything goes smoothly.

If you’d like to chat about any of the above, feel free to book a call with one of our specialists. We’re here to guide you through the process and make it as pain-free as possible.