Thinking About Selling Your Business? Start Planning 3 Years Before Exit
Most business owners start thinking about tax the moment a buyer comes knocking. By then, it's too late.
If you're considering selling your business in the next few years — even if it's just a thought at the back of your mind — the time to start planning is now. Not when you have a letter of intent on the table. Not when your accountant is scrambling through twelve months of records. Now.
Here's why three years is the magic number, and what you should actually be doing with that time.
Why Three Years?
Tax planning isn't something you bolt on at the end. It's something you build into the structure of your business over time.
The reliefs that can make the biggest difference to how much you actually walk away with — Business Asset Disposal Relief (BADR), for example — have qualifying conditions that need to be met for a minimum period before the sale. You can't claim them retrospectively.
Three years gives you enough runway to restructure where it makes sense, clean up your finances, extract value tax-efficiently, and arrive at the sale in the best possible position. Two years is tight. One year is damage limitation. Twelve months is a conversation about what you've already lost.
What Does Good Exit Planning Actually Look Like?
It's not just a conversation with your accountant in the final stretch. It involves thinking about four things early:
1. Your ownership structure
How you own the business matters enormously. Are shares held personally, through a holding company, or jointly with family members? The structure affects whether reliefs apply, how proceeds are taxed, and whether there are smarter ways to pass value to the next generation before a sale.
2. Business Asset Disposal Relief
BADR (formerly Entrepreneurs' Relief) can reduce Capital Gains Tax on qualifying gains to 10% — compared to the standard 24% for higher rate taxpayers. But you need to have been a director or employee, held at least 5% of shares, and met other conditions for at least two years before disposal. Miss the window and you miss the relief.
3. Value extraction before sale
Before a business sells, there's often an opportunity to extract retained profits as dividends, pension contributions, or other tax-efficient routes — reducing the value on which CGT is charged while putting money in your pocket at a lower rate. This takes time to do properly and within HMRC's rules.
4. Your personal tax position
The year you sell is likely to be your highest-earning year. Planning around that — using allowances, considering the timing of the transaction across tax years, thinking about pension contributions — can make a meaningful difference to the final number.
The Conversation Nobody Wants to Have Early Enough
We understand why business owners put this off. Selling feels distant, uncertain, or even disloyal to talk about while you're still building. But planning early doesn't mean you're committed to a timeline. It means you're not leaving money on the table if things move faster than expected.
The businesses that achieve the cleanest exits — maximum proceeds, minimal tax, no last-minute surprises — are almost always the ones where someone started thinking about this years in advance.
Where Should You Start?
If a sale is on your horizon — even loosely — book a conversation with us now. We'll help you understand where you stand today, what reliefs you're on track to qualify for, and what steps are worth taking in the next twelve months.
There's no cost to that conversation. But there is a cost to waiting.
