Business Exit Planning: How to Make Your Company Sellable and Tax-Efficient Years Before You Sell

Most owners think about selling their business the year they want to leave. By then, the levers that matter most (the tax reliefs, the multiple a buyer will pay, the readiness of the accounts) are largely fixed. The owners who exit best treat it as a two to three year project. That is what business exit planning is: lining up the route, the tax runway, and the readiness work early, so that when you complete you keep the most cash for the least friction.

This guide walks through defining your exit goal, choosing your route, the year-by-year tax runway (including the two changes that reshaped the numbers in 2025 and 2026), and how to make a business genuinely sellable. Exit and succession planning is general advisory work; the tax on your specific figures should be modelled by an accountant before you commit to anything.

Why exit planning starts years before you sell

Three things take time, and all three drive the outcome.

• Tax qualification. Business Asset Disposal Relief (BADR) requires you to hold at least 5% of the ordinary shares and voting rights, and to be an officer or employee, for a continuous two years before disposal. If your shareholdings or roles need restructuring, that clock has to start early.
• Sellability. A business that cannot function without the founder trades at a discount. De-risking owner dependence, signing recurring revenue onto contracts, and cleaning the accounts is twelve to eighteen months of work that raises the multiple a buyer will actually pay.
• Route choice. A trade sale, an Employee Ownership Trust (EOT), and a management buyout each carry a different tax bill, a different buyer, and a different payout profile. You want to choose deliberately, not default into whatever appears first.

Start late and you inherit whatever position you happen to be in. Start early and you shape it. Our companion guide to selling your business covers the transaction itself; this page is about the years before it.

Step one: define your exit goal

Before route or tax, get clear on what a good exit means to you. Three variables usually dominate:

• Price. The number you need to walk away, after tax, to fund what comes next. Work backwards from the after-tax figure, not the headline.
• Timing. A hard date (health, age, a co-founder split) or a flexible window. Flexibility is worth real money, because it lets you time completion around rate changes and market conditions.
• Legacy. Whether continuity for staff, customers, and your name matters. If it does, an EOT or management buyout may beat a trade sale even at a lower headline price.

These three often pull against each other. A trade sale usually maximises price and gives a clean break; succession routes protect legacy and continuity but tend to be paid over several years from future profits. Naming your priority early stops you drifting into a route that fights your real goal.

Choosing your exit route

There are five main exits, and the right one depends on your goal and your gain size:

• Trade sale to a competitor or larger acquirer. Best headline price, clean break, and BADR can apply. Covered in the sell my business guide.
• Employee Ownership Trust (EOT). Sell a controlling interest to a trust that holds the company for the staff. Continuity-friendly, but the tax changed sharply in November 2025 (see below). Start with the employee ownership trust guide.
• Management buyout (MBO). Your existing managers buy the company. Continuity plus a real price, typically part-funded from future profits or a vendor loan. See the management buyout guide for how the structure works.
• Family succession. Passing shares to the next generation, with its own CGT and inheritance-tax considerations.
• Members' voluntary liquidation (MVL). Winding up a solvent company and extracting the reserves as capital, which can suit a business with no buyer but strong cash.

The exit-route tax comparison sets out the net proceeds under each, on the same business, so you can see how much the choice is worth before you commit.

The tax runway: what to lock in, and when

The tax on exit is where planning pays for itself. Two dates now dominate the arithmetic.

BADR at 18% from 6 April 2026. Business Asset Disposal Relief reduces CGT on the first £1,000,000 of qualifying lifetime gains. The rate rose from 14% to 18% for disposals on or after 6 April 2026 (it was 10% up to 5 April 2025). The £1m lifetime limit is unchanged; gains above it are taxed at 24% for higher-rate sellers or 18% within any unused basic-rate band, after the £3,000 annual exempt amount. For the qualifying conditions and worked mechanics, use our selling your business CGT and BADR guide and the BADR fundamentals page rather than reworking them here.

The EOT change from 26 November 2025. This is the one most guides still get wrong. At the Autumn Budget on 26 November 2025, the CGT relief on a disposal of a controlling interest to an EOT was cut from 100% to 50%, with immediate effect. Under the new rule, 50% of the gain is your chargeable gain at sale, and the other 50% is held over and bites on the trustees' future disposal of the shares. Business Asset Disposal Relief and Investors' Relief cannot be claimed on the taxable half. Guides that still say a sale to an EOT is entirely CGT-free were written before 26 November 2025 and are now wrong.

Put numbers on it. Take an owner selling 100% of a trading company for £4,000,000 with a £200,000 base cost, a £3,800,000 gain:

Item	Figure
Total gain	£3,800,000
Old rule (pre-26 Nov 2025): 100% relieved	£0 CGT at sale
New rule: chargeable now = 50% × £3.8m	£1,900,000
Less annual exempt amount	£3,000
Taxable now (no BADR or IR on this slice)	£1,897,000
CGT rate	24%
CGT payable now	£455,280
Remaining 50% (£1,900,000)	latent gain, bites the trustees on a future disposal

Before 26 November 2025 this exit was tax-free. The same sale today triggers roughly £455,000 of CGT and leaves a further £1.9m of latent gain inside the trust. That does not kill the EOT case (continuity, retention, and a phased exit can still make it right), but it means the route must be modelled on the new numbers, not the old headline.

Both dates make the completion date a live lever. Because a day either side of 6 April 2026 or 26 November 2025 can move the bill materially, never let a legal timetable set your completion date without checking the tax cost first.

A year-by-year exit runway

Here is how the milestones sequence for a typical owner aiming to complete in roughly three years. Treat it as a template to adapt, not a fixed calendar.

When	Focus	Tax-qualifying milestone
Year -3	Clarify the exit goal and shortlist a route; get a baseline valuation	Confirm you hold at least 5% of shares and voting rights and are an officer or employee, so the BADR two-year clock is running cleanly
Year -2	De-risk owner dependence; clean and normalise the accounts; sort contracts	Keep the company genuinely trading (BADR and EOT relief both need a trading company, not an investment one); plan how surplus cash is extracted
Year -1	Prepare for sale, build the data room, sound out buyers or managers	Check the two-year BADR ownership and employment test is satisfied; model CGT under each route before approaching the market
Sale year	Negotiate, agree heads of terms, run diligence, complete	Time completion for the position you want (18% BADR from 6 April 2026; the 50% EOT charge from 26 November 2025) and confirm the modelling before signing heads of terms

The point of the runway is that nothing on the right-hand column can be fixed at the last minute. The two-year test cannot be backdated, a trading-company issue cannot be unwound the week before completion, and the modelling is worthless once heads of terms are signed.

Making the business sellable: de-risking owner dependence

Tax planning sets the bill; sellability sets the price. Buyers pay a higher multiple for a business that runs without the founder, and they discount hard for anything that looks fragile in diligence. The core readiness work is:

• Reduce owner dependence. Build a management layer that owns customer relationships and day-to-day decisions, so the business is not you with a payroll.
• Lock in recurring revenue. Move key customers and repeat income onto proper contracts. Contracted, transferable revenue is worth more than goodwill that walks out with you.
• Clean the financials. Normalise the accounts, document add-backs, and remove personal costs so the adjusted profit a buyer values is credible and defensible.
• Fix the value-killers. Customer concentration, a lapsed key contract, unclear IP ownership, or a related-party arrangement will all be found and priced against you. Fix them before you list.

This is a project in its own right. Our guide to preparing a business for sale sets out the full readiness and due-diligence checklist, including what belongs in a data room.

Succession versus sale

If continuity matters, the choice is not simply price. A trade sale maximises the number and gives a clean break, but hands your business and staff to an outside owner. Succession routes (family, an MBO, or an EOT) keep the business in familiar hands and protect the culture and name you built, usually at the cost of being paid over time from future profits rather than in one cheque at completion.

The tax now cuts across this. Because the EOT charge is 50% rather than nil, the tax advantage that once made continuity almost free has narrowed. That does not mean picking cash over legacy; it means pricing legacy honestly. Model an EOT or MBO on the current numbers, compare the net proceeds and payout timing against a trade sale, then decide with your eyes open. Whichever you lean toward, decide early: the readiness and the tax runway differ by route.

Building your exit timeline

Pull the threads into one plan with owners and dates. A workable timeline names, for each of the next three years, the readiness tasks (management, contracts, accounts), the tax milestones (BADR clock, trading status, cash extraction), and the decision points (route confirmed, valuation refreshed, market approach). Review it every six months, because a business, a market, and the tax rules all move. The 2025 EOT change is a live example of why a plan built once and left untouched can be out of date within a year.

Common exit-planning mistakes

• Starting too late, so the BADR clock is unrun and the accounts are still messy when a buyer appears.
• A founder-dependent business, which caps the multiple no matter how profitable it is.
• Hoarding surplus cash, which muddies the trading-company test both reliefs depend on and gets excluded from the price anyway.
• Signing heads of terms before the CGT is modelled, which locks in a structure and a date before anyone has checked the tax.
• Assuming an EOT is still tax-free, when 50% of the gain has been chargeable since 26 November 2025.

Every one of these is avoidable with a two to three year runway and the numbers modelled early.

Plan your exit with the tax modelled first

Business exit planning is unregulated advisory work, and we can help you shape the route, the readiness, and the timeline. The tax on exit (CGT, Business Asset Disposal Relief at 18%, the new 50% EOT charge, and how surplus cash comes out) is core accountant work, and it should be modelled on your actual figures before you commit to a route or a completion date. If you are two or three years from selling, that is exactly the right time to book an exit tax review. We will map your runway and model the CGT under each route so you go to market with the position already optimised, not left to chance at completion.

Further reading from primary sources: gov.uk Business Asset Disposal Relief, HMRC's Capital Gains Manual CG63950 (BADR) and CG67800 (disposals to EOTs), the gov.uk Capital Gains Tax rates, the EOT relief legislation at TCGA 1992 s.236H onwards, and the House of Commons Library briefing on Employee Ownership Trusts (CBP-10437).