How far ahead should I start exit planning?

Three to five years where you have the choice, and the qualifying periods explain why. Business Asset Disposal Relief requires at least two years of holding the shares and voting rights before disposal, so eligibility cannot be created on the eve of a deal. Reducing owner-dependency and building a demonstrable profit trend take longer still, because a buyer wants to see a pattern across several years rather than one improved one. If a sale is already on the table and none of that has happened, the work still pays — it simply shifts from increasing the price to protecting it during diligence.

What is my business actually worth?

Broadly, maintainable profit multiplied by a number reflecting how risky those profits look to a buyer, then adjusted for cash and debt at completion. Neither half is fixed. Maintainable profit is your reported profit adjusted for owner-specific costs and one-offs, which is why clean records matter so much. The multiple moves with customer concentration, the quality of contracts, the strength of the team, and how much depends on you personally. Two businesses with identical profits can be worth very different amounts for those reasons alone — which is encouraging, because nearly every factor in the multiple is something you can work on before you sell.

Do I qualify for Business Asset Disposal Relief?

For a share sale the main conditions are that the company is a trading company, that you have held at least 5% of both the ordinary shares and the voting rights, and that this has been true for at least two years to the date of disposal. Sole traders and partners disposing of a business have their own version of the test. The relief is capped at £1 million of qualifying gains across your lifetime rather than per disposal, so earlier claims reduce what remains. Common ways to fall out of it include large cash or investment holdings undermining trading status, and share reorganisations that quietly restart the two-year clock.

Should I sell the shares, or the trade and assets?

Sellers usually prefer a share sale and buyers usually prefer trade and assets, which is why it gets negotiated rather than chosen. Selling shares gives you one capital gain in your own hands and the possibility of Business Asset Disposal Relief. Selling the trade and assets means the company receives the money and is taxed on it, and you then still have to extract the proceeds from the company — a second tax event. Buyers push for assets because it leaves historic liabilities behind. The answer depends on structure and numbers, and it materially changes what you keep, so take advice well before heads of terms.

What if I want to pass the business to my children instead?

Then the centre of gravity moves from capital gains tax to inheritance tax and the gifting rules. From 6 April 2026, 100% business property relief applies to the first £2.5 million of qualifying business and agricultural property, with 50% relief on value above that, and any unused allowance can pass to a surviving spouse or civil partner. A lifetime gift of shares is still a disposal for capital gains purposes even though no money changes hands, although holdover relief applies in some circumstances. The harder questions are rarely the tax ones: whether the next generation wants it, whether they can run it, and how you are funded once you stop.

What will a buyer ask for, and how long does diligence take?

Three years of statutory and management accounts, the full tax position, customer and supplier contracts with their change-of-control terms, employment contracts, the lease, intellectual property ownership, a clean share register, and any personal guarantees. How long it takes depends almost entirely on how much of that already exists. A prepared business answers most of it in a fortnight from a folder assembled in advance. An unprepared one spends months reconstructing documents, and every delay hands the buyer another reason to revisit the price. Assembling that pack a year early is the cheapest protection of value in the whole process.

Exit Planning for Business Owners

What exit planning actually means

Exit planning is the work of preparing a business — and its owner — for an eventual sale, succession or transfer of ownership. It covers making the business saleable, choosing the route out, and getting the tax and the paperwork into shape before a transaction rather than during one. It is not only for owners with a firm sale date in mind. It matters just as much to owners who simply want to know that if a good offer arrived, or if circumstances changed without warning, the business would be in a position to respond.

This guide is general and educational. The reliefs described below are real and current, but whether any of them applies to you depends on your structure, your shareholding and your timing, and that needs specific advice.

Why it starts years before a sale, not months

The biggest misconception about exit planning is that it is something you do in the run-up to a sale. The things that most affect what a business is worth are built over years: clean financial records, a business that does not depend on the owner personally, documented processes, a demonstrable profit trend, and contracts that transfer to a buyer. Several of the tax reliefs also carry qualifying periods measured in years, not months. An owner who starts thinking three to five years out has room to change the outcome. One who starts the month before going to market is negotiating with whatever they already have.

The routes out

Exit is not one decision, it is a choice between several, and they have very different tax, timing and people consequences:

Trade sale — selling to a competitor, a supplier or a consolidator. Usually the highest headline price, usually the most diligence, and often part of the money deferred or tied to performance after completion.
Management buy-out — selling to the people already running it. Smoother handover, but the buyers rarely have the cash, so the deal is typically funded out of the business's own future profits.
Family succession — passing it on, whether by sale or by gift. The tax questions shift from capital gains to inheritance tax and gift rules, and the hardest part is usually readiness rather than money.
Employee ownership trust — selling a controlling stake to a trust held for the employees, with its own qualifying conditions and its own capital gains treatment.
Winding up — closing and extracting the reserves. Legitimate where the value genuinely was the owner, and worth planning properly rather than defaulting into.

Owner-dependency is the discount

The issue that surfaces most often in exit planning is how far the business relies on the owner personally — for the client relationships, the pricing decisions, the quoting, the knowledge that lives in one head rather than in a system. A buyer is purchasing future profits. If those profits visibly walk out with you, they price that risk in: through a lower multiple, through more of the money deferred, or through an earn-out that keeps you working for years after you thought you had left.

Reducing that dependency is a multi-year project, which is exactly why it belongs at the start of exit thinking rather than the end. The practical tests are unglamorous. Could someone else quote a job to the same standard tomorrow? Are your top customer relationships held by the business or by you? If you took six consecutive weeks off, what would break? Fixing those is the same work as building a business you enjoy running — which is why it is worth doing whether or not you ever sell.

The tax on the way out

Selling shares in your own company is a capital gain. For 2026/27 the annual exempt amount is £3,000, and the main rates of capital gains tax are 18% within the basic rate band and 24% above it.

Business Asset Disposal Relief (BADR) reduces the rate on qualifying disposals. The rate has moved twice in two years: it was 10% on disposals up to 5 April 2025, 14% for disposals between 6 April 2025 and 5 April 2026, and 18% for disposals on or after 6 April 2026. There is a £1 million lifetime limit on qualifying gains. To qualify on a share sale you must generally have held at least 5% of the shares and the voting rights, in a trading company, for at least two years to the date of disposal.

Worked example — what the relief is worth

Illustrative figures, on a disposal in 2026/27.

An owner sells her shares for £900,000. She subscribed for them at £10,000, so the gain is £890,000. After the £3,000 annual exempt amount, £887,000 is taxable.

With BADR at 18% — £159,660
Without it, at the 24% main rate — £212,880
Difference — £53,220

Now take a larger exit. A gain of £1,500,000 uses the full £1 million lifetime limit at 18% (£180,000), and the remaining £500,000 is charged at the 24% main rate (£120,000). Total tax £300,000, an effective rate of 20% on the whole gain.

The direction of travel is the point worth taking away. That same £1 million of qualifying gain would have cost £100,000 in tax on a disposal before 6 April 2025 and £140,000 in 2025/26. It costs £180,000 today. Deals do not get cheaper by waiting for the rules to improve, and the two-year qualifying period means the work to become eligible has to start well ahead of any conversation with a buyer.

If you are passing it on rather than selling

Where the plan is to keep the business in the family, the relevant relief is inheritance tax business property relief rather than capital gains tax — and it changed substantially on 6 April 2026.

From that date, 100% relief applies to the combined value of qualifying business and agricultural property up to an allowance of £2.5 million per person, with relief at 50% on value above it. The Government announced this figure on 23 December 2025, raising it from the £1 million originally legislated, and confirmed that any unused allowance can be passed to a surviving spouse or civil partner — so a couple can cover up to £5 million of qualifying business assets between them.

Illustrative figures. A qualifying trading business worth £4 million in a single estate: the first £2.5 million attracts 100% relief, the remaining £1.5 million attracts 50% relief, leaving £750,000 chargeable. At the 40% inheritance tax rate that is £300,000 — an effective rate of 7.5% across the whole £4 million, before the nil-rate band and any other exemptions. Inheritance tax on business assets can generally be paid in instalments over ten years, which matters when the value is in a company rather than in cash.

What a buyer will actually ask for

Diligence is where unprepared businesses lose value, usually not because something is wrong but because nothing can be evidenced quickly. Expect to be asked for at least: three years of statutory accounts and the underlying management accounts; the tax position including corporation tax, VAT and PAYE, with any open enquiries; signed customer and supplier contracts, and whether they survive a change of control; employment contracts and any outstanding claims; the lease; ownership of intellectual property, domains and software; a clean share register with every historic transfer documented; and a schedule of anything the owner personally guarantees.

The pattern is consistent: it is not the bad news that kills deals, it is the delay while someone goes looking. A business that can produce all of the above in a fortnight negotiates from a different position to one that takes four months.

A three-year sequence that actually works

Three years out — confirm your route and your structure. Check whether you hold at least 5% of shares and votes, and whether the company is genuinely trading rather than holding surplus investments. Start moving customer relationships off yourself.
Two years out — the qualifying clock for the two-year BADR period should already be running. Tighten margins and stop the discretionary owner spending that depresses reported profit. Get management accounts monthly and reliable.
One year out — assemble the diligence pack before anyone asks. Document processes. Put a second person in front of every key account. Settle anything untidy in the share register.
Six months out — take specific tax advice on the deal structure, and agree what "good enough" looks like so you are not renegotiating your own goalposts mid-process.

Where Buzz fits in

Exit planning sits inside our tax planning work, alongside succession and personal tax for business owners. In practice most of the value comes earlier than the tax: management accounts that make a profit trend evidenceable, and the advisory work of reducing how much of the business runs through you. Where an exit produces personal wealth to invest or protect, that is regulated financial advice and comes from Equity & General (FCA No. 474163), to whom we introduce clients — Buzz Accounting does not give investment advice.

If exit is something you are starting to think about, even vaguely, book a free discovery call and we will talk through where your business stands today.

An introduction to exit planning for business owners