Selling your business? Here’s what to do before the money lands

From tax planning and tidying up the business to legal admin and professional advice, this article gives you a checklist to start working through.

Because once the money's in the bank, it's too late to rewind.

Start planning early – years, not months

The decisions that save you the most tax and unlock the best deal often need to be made years in advance. Miss the window, and you miss the benefit.

Qualifying for Business Asset Disposal Relief (BADR)

Before we get started: This article focuses on owners selling shares in a limited company. If you're a sole trader or partner, the rules differ and aren't covered here.

BADR (formerly Entrepreneurs' Relief) is a valuable tax break available to business owners. It allows qualifying gains up to a lifetime limit of £1 million to be taxed at a reduced capital gains tax (CGT) rate.

As of 6 April 2025, this rate is 14%, and it's scheduled to increase to 18% from 6 April 2026. That's a significant saving compared to the usual 24% for higher and additional rate taxpayers.

But to qualify, you need to meet specific conditions at least two years before the sale. You must:

• Hold at least five percent of the voting rights and entitlement to profits,
• Be an officer or employee of the company,
• And the company must be trading (not just holding investments).

Also, check that the company qualifies as 'trading'. If more than 20% of its activities or assets are non-trading – such as investment property or surplus cash – HMRC could deny the relief.

If you're not already ticking all of those boxes, you'll need time to fix it – whether that's issuing shares, formalising your role, or restructuring the business.

If you're expecting your shareholding to drop below 5% (say, because new shares are being issued to investors) you could lose your eligibility for BADR.

But in some cases, you can make an election to "freeze" your gain at the moment before dilution, locking in the discounted CGT rate on that portion. It's a complex area, and the timing has to be right, so get advice early.

Spreading the tax burden

There are other strategic reasons to plan early.

If your spouse or civil partner owns at least five percent of the business and is an employee or officeholder, you can both use your CGT allowances and, if eligible, claim BADR – potentially securing a reduced CGT rate on up to £2 million of lifetime gains between you.

But transferring shares to a spouse isn't something you can do the week before you sell. To get the full benefit, they must meet the same two-year BADR criterion. So if you're even thinking about bringing them in, you'll need to act early.

Timing the sale can also affect how much tax you owe. The CGT allowance (£3,000 per person from April 2025) resets every April, as do pension and ISA limits. Selling just after 6 April can give you a clean tax year to work with.

Cleaning up and restructuring

Planning early also gives you breathing space to get your business in shape for sale. That might include:

• Converting from sole trader to limited company (if you haven't already),
• Separating out personal assets that shouldn't be part of the deal,
• Paying off debts or tidying up shareholdings,
• Sorting any governance issues that could spook a buyer.
• Clarify what's being sold. If your company owns other businesses, you might want to split them off and sell only the trading arm. That's what a demerger is for.

Early planning affords time to get your structure right, lock in the best reliefs, and time your exit sensibly. Slowly, slowly, catchy monkey. A mock due diligence check by your accountant can flush out problems now – before a buyer uses them to chip away at your price.

Clear debts, check liquidity and avoid last-minute panic

If you haven't properly managed your debts and cash flow before the sale, you risk torpedoing the deal or walking away with less than you imagined.

Tidy up your liabilities

Start with a full review of everything you or the business owe. That means business loans, overdrafts, asset finance, director's loan accounts – the lot.

Some loans include a change of control clause, which means they have to be repaid immediately if the business is sold. You don't want that buried in the fine print and sprung on you three days before completion.

These clauses aren't just in bank paperwork. They crop up in leases, supplier contracts, customer agreements – basically anywhere someone wants a say over who they're dealing with.

If you don't flag them early and line up approvals, you risk a last-minute scramble or even the prospect of the deal falling apart.

Check the sale agreement carefully: buyers will often insist that debts be cleared or accounted for before they hand over the money.

In small business sales, it's common to agree a "cash-free, debt-free" deal. That means you keep the cash in the business, but also have to clear all debts before completion.

If you've got high-interest loans or awkward repayment terms, now's the time to sort them out. Not once contracts are on the table. If you're selling the shares of a company, they may adjust the sale price downwards to reflect what you still owe.

Don't forget your personal debt either. If you've personally guaranteed a business loan, you may still be on the hook after the sale, unless the buyer agrees to take on the guarantee (and their lender is happy with that).

Lenders may insist on refinancing if they don't like the new owner. And if the guarantee stays in place, it's your neck on the line for a business you no longer control. Sort this before signing, not after.

If your company has unresolved liabilities – like a tax dispute, legal claim, or health and safety issue – sort it or disclose it. Buyers hate surprises. They'll either cut the price or demand a personal guarantee.

Cash is still king – even when you're selling

You may be selling a business worth millions, but that doesn't mean you're about to feel flush.

Deals take time. Paperwork drags. Lawyers bicker. You might be rich on paper, but until the money's in your account, you've got bills to pay.

That includes:

• Personal costs: Rent or mortgage, school fees, food, tax instalments.
• Business expenses (if you're still in day-to-day control): wages, rent, supplier payments.

If your bank accounts are running low, and all your wealth is tied up in a deal that hasn't completed yet, you're in a precarious position.

Worse still, tax bills don't wait.

Capital gains tax is due by 31 January following the end of the tax year in which the sale takes place.

And that's not the only hit. If the deal includes an earn-out (where part of the sale price is paid later, depending on how the business performs after the sale) or shares in the buying company, you might be taxed before you ever see the full amount.

There's also the risk of income tax kicking in on parts of the deal. A smart structure can avoid nasty surprises.

That's why it's a good idea to set aside a cash buffer before the deal is signed. A common rule of thumb is six to 12 months of essential outgoings. Keep it somewhere safe and accessible, like in a money market fund or high-interest savings account.

You should also budget for the sale costs themselves. Solicitors, accountants, success fees – they all want paying, often right at completion.

Tot up your expected bills and ringfence the cash. Nothing kills a celebration like an unpaid invoice from your solicitor.

Boring admin can save the day

Speak to your bank if you've got ongoing loans or mortgages. Once you've sold the business, your income changes – sometimes dramatically.

Lenders may want proof that you can still cover repayments, especially if your earnings are shifting from salary to investment income or a large one-off windfall.

Having documents ready (e.g. projected income statements or post-sale plans) can smooth this over.

But don't stop there. If your company has multiple shareholders, formalise any loose arrangements now. That includes share registers, option agreements, shareholder loans, and director service contracts. Buyers will ask to see them, and if they don't exist, it weakens your position.

Think of it like selling a house: you wouldn't let a viewing go ahead with a leaking boiler and a broken fence. Tidy the records. Fix the basics. Make the buyer's job easier and (hopefully) they'll pay you more for the privilege.

Don't ignore inheritance tax

Business shares in a trading company can be 100% exempt from inheritance tax if you die while still holding them. Meanwhile, cash from a sale is fully taxable. That's the trade-off. You're swapping an IHT-free asset for one that could cost your estate 40% (above the nil-rate band of £325,000).

This matters most if you're older or selling with succession in mind. Gifting shares before the sale may allow your family to inherit the business with tax relief still intact.

Done properly, it can reduce or eliminate inheritance tax altogether.

But timing is everything. Gifts usually need seven years to be out of your estate. And if you die sooner, relief might still apply – but only if your children still hold the shares and the business still qualifies.

For Business Relief to apply, these conditions must be met:

• The company must be unlisted and actively trading (not just holding investments).
• The shares must have been held for at least two years.
• The shares must still be held at the time of your death.
• The company must not be subject to a binding contract for sale.

Speak to a tax specialist before you sign. A wrong move could hand HMRC a large slice of the family wealth you thought you were passing on.

We go into lots more detail on business relief strategies – including common pitfalls to avoid – in our guide to wealth protection strategies for high net-worth people.

Get your team in place early

Selling a business comes with deadlines, tax rules, and financial decisions that don't forgive sloppiness. You won't get far without the right people beside you.

Start with the basics: a solicitor to manage the sale documents, and a tax adviser to help structure the deal.

As explained above, many key tax reliefs (like BADR or spousal transfers) need to be arranged years in advance, so don't think you can parachute them in at the last minute and get the same results.

A corporate finance adviser or broker could also be worth the fee, especially if your business is large or complex. They help find buyers, set a fair valuation, and negotiate stronger terms.

Ask what deals they've closed recently. And check that they know your sector.

On the personal side, if the sale will make you wealthy, talk to a regulated financial adviser. Preferably one with "Chartered" after their name. A good IFA won't manage the sale itself, but they will help you handle what comes after: pensions, investments, insurance, estate planning.

Always check your adviser is on the FCA register. Anyone can call themselves a "wealth expert", but only regulated ones have to meet minimum standards.

Done right, a good team will save you money. And hopefully you'll sleep better knowing you've dodged the traps that catch many people unprepared.

What to do and when to do it: a checklist

What to do	Why it matters	When to do it
Check if you qualify for BADR (CGT relief)	Potentially cuts CGT to 14 or 18%	At least 2 years pre-sale
Check spouse eligibility for BADR	Double tax-free allowance, split gains	At least 2 years pre-sale
Review your company's trading status	Needed for tax reliefs	ASAP
Transfer shares to spouse (if planned)	Unlock spouse's BADR/allowances	At least 2 years pre-sale
Clean up business structure	Buyers want clean, simple deals	1-2 years pre-sale
Review and clear debts/liabilities	Surprises can kill deals or cut price	6-12 months pre-sale
Check for change-of-control clauses	Avoid last-minute dealbreakers	6-12 months pre-sale
Sort out share registers and contracts	Buyers will check all paperwork	3-6 months pre-sale
Prepare for IHT planning (if needed)	Shares may be IHT-free, cash isn't	1-2 years pre-sale
Assemble your adviser team	Tax/legal mistakes are often costly and irreversible	ASAP
Budget for sale costs and cash buffer	Avoid panic when bills hit or if deal drags on	ASAP

Bottom line

Selling a business is a one-shot deal. The best outcomes come from what happens in the years leading up to the sale. Some tax reliefs depend on timing, like Business Asset Disposal Relief, which requires at least two years' preparation. Others, such as inheritance tax relief, are lost the moment you sell.

You need time, clean records, and advisers who understand how to do things the right way. Get moving while the clock's still on your side.

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