Selling a Long-Established Business: Pre-Sale Tax Planning for UK Owners (2026/27)

Deal Ascent · 23 September 2026

This guide is for owners who founded or inherited their business decades ago and are now preparing to sell to a third-party buyer. It covers the tax structures that must be in place before a sale process begins, ranked by potential impact, and the reliefs and extraction steps to secure before completion. For each structure it sets out how it works, implementation time, whether HMRC clearance applies, how long it must be in place before the sale, and its value in a worked example. Points negotiated in the sale agreement, such as earn-outs and loan notes, are outside its scope. For the wider valuation context, see what a business seller banks.

Why timing decides the outcome

Earlier this year a founder-owned business in the IT services sector approached Deal Ascent to run a sale process. The owners were ready to go to market, the business was performing, and buyer appetite in the sector was strong.

The preparation work established that the group's corporate structure would not support the intended tax treatment until a statutory qualifying period had run. Launching immediately would have meant either abandoning the structure or completing a restructuring mid-process, with the anti-avoidance exposure and buyer scrutiny that follows from restructuring once a transaction is in contemplation. The process was therefore scheduled for early 2027, and the intervening months are being used for the structural work, vendor due diligence and positioning.

That case is typical rather than unusual. Owners generally start thinking about tax when a buyer is already at the table, by which point the structures that matter most are closed off. The point of this guide is to show which ones must be in place first, and how long each takes.

Deal Ascent's role in these situations is to run the sale process and to sequence it around the structural work: assessing exit readiness, establishing what the qualifying periods mean for a realistic launch date, coordinating with the client's tax and legal advisers so that clearances and implementation sit off the critical path, and then taking the business to market once the structure is settled. The guide below sets out the structures themselves; the advisory judgement lies in deciding which are worth the delay for a given business, and in building a timetable that does not sacrifice a favourable market window to a structure worth less than the value at stake in the process.

Part A: Context

A1. Tax rates and reliefs in 2026/27

The BADR rate was 10% until 5 April 2025, 14% from 6 April 2025 and 18% from 6 April 2026. The £1m lifetime limit is unchanged. Before 6 April 2025 the relief could save up to £140,000 per person; from 6 April 2026 the maximum is £60,000.

For a business sold for between £5m and £50m, that saving is between 1.2% and 0.12% of the sale value for a single owner. BADR still dominates discussion of exit tax, but at these values it is marginal. This is why owners in this range increasingly look at the structures in Part B. See the third bridge, from equity value to take-home proceeds.

From 6 April 2026 the dividend ordinary rate rose to 10.75% and the upper rate to 35.75%. The additional rate is unchanged at 39.35%.

A2. Calculating the gain on long-held and inherited shares

• Founders: the base cost is usually the nominal value at incorporation, so almost the whole sale price is gain.
• Inherited shares: the base cost is the market value at inheritance (the probate value).
• Shares held since before 31 March 1982: these are rebased to their value on that date.
• Earlier BADR or Entrepreneurs' Relief claims: these reduce the £1m lifetime limit still available.

These points should be established at the outset, because they fix the size of the gain every structure in this guide is trying to reduce.

A3. The worked example

All benefits in this guide are measured against the same case. You can also value the business using Deal Ascent’s valuation tools:

• a business sold to a third party for £50m;
• shares held equally by a married couple, both directors and both additional-rate taxpayers;
• negligible base cost.

With no planning, CGT is £12m, leaving net proceeds of about £38m.

A4. HMRC clearance and qualifying periods

HMRC does not approve structures in advance. Three separate time requirements apply.

1. Implementation. Valuations, legal documents, approvals and trust deeds typically take two to twelve weeks.

2. Advance clearance. This is optional confirmation from HMRC that a specific anti-avoidance rule will not be applied.

• None of the main statutory clearances is mandatory, but advisers generally apply wherever a transaction could fall within legislation that offers one.
• The relevant clearances are section 138 TCGA 1992 (share exchanges), section 701 ITA 2007 (transactions in securities) and section 1091 CTA 2010 (demergers).
• HMRC must respond within 30 days of the application, or within 30 days of receiving any further information it requests. Four to eight weeks is a realistic allowance.
• A positive transactions-in-securities clearance prevents HMRC from issuing a counteraction notice on the transactions described, so the application must be complete.
• Where no statutory clearance exists, HMRC's non-statutory service aims to respond within 28 calendar days.

3. Qualifying period. This is the minimum time between implementing a structure and the sale, fixed by statute: for example, 24 months for BADR and 12 months for the substantial shareholding exemption. It runs from implementation, not from clearance. Clearance comes before implementation, so its timetable is additional.

Share-exchange rules since November 2025. The old test asked whether a transaction was "part of" a tax-avoidance scheme. The new test asks whether avoiding tax is the main purpose, or one of the main purposes, of the arrangements. The change applies from 26 November 2025 and was legislated in Finance Act 2026. In practice, any restructuring involving a share exchange now needs clearance.

A5. Moving abroad before a sale

A move abroad is a personal decision rather than a structure, but its timing interacts with the structures below.

• A seller who is non-UK resident when the sale takes place is generally outside UK CGT on shares in a trading company. There is currently no general UK CGT exit charge on individuals who cease to be resident.
• The seller must stay non-resident for more than five years. Otherwise, the temporary non-residence rules tax the gain in the year of return.
• From 6 April 2026, all distributions from a close company received during temporary non-residence are potentially taxable.
• Under the residence-based IHT rules introduced in April 2025, long-standing UK residents remain within UK IHT for up to ten years after leaving.

A move abroad works best combined with a family holding company (Structure 1): the proceeds stay invested and are extracted after the five-year period.

Part B: The structures, ranked by impact

Structures are ranked by the tax at stake in the worked example, adjusted for how reliably that benefit is realised.

The property carve-out can be worth more than the trust. It ranks lower because it only applies where the company owns property that the owners intend to keep.

Structure 1: Family holding company

How it works. A family-owned holding company sells the trading company to the buyer. If the substantial shareholding exemption (SSE) applies, the holding company pays no corporation tax on the gain. The full £50m stays in the company for reinvestment, compared with about £38m reaching the owners personally after CGT. After the sale, the holding company in effect becomes a family investment company.

Conditions.

• The holding company must hold at least 10% of the trading company's shares, votes, distributable profits and assets on a winding-up.
• It must have held that stake for at least 12 months before the sale.
• A newly inserted holding company starts its 12-month clock on the day of insertion. Earlier periods count only where the holding company itself held the original shares, so the owners' personal ownership does not count.

Extraction. Investment returns inside the company are taxed at corporation tax rates, and dividends it receives from shareholdings are generally exempt. The final tax depends on how and when value is taken out:

Limits. Extracting everything immediately at 39.35% would leave about £30.3m, compared with £38m from a direct sale. The structure therefore only pays where there is a long investment horizon or a planned lower-tax route out. Examples are gradual extraction through family members' basic rate bands, extraction after a move abroad, or a liquidation.

Risks.

• Clearance. Inserting a new holding company once a sale is in contemplation is exactly what the post-2025 main-purpose test targets. Clearance, not the 12-month period, is the real constraint.
• Proposed rule changes. HMRC's June 2026 consultation proposes replacing the transactions-in-securities rules with a principles-based regime. It notes that holding companies inserted for legitimate commercial reasons could face adverse consequences on a later return of capital. Liquidation routes may narrow.

Timing.

• An existing holding company that has already held the trading company for 12 months needs no new steps.
• A new holding company takes two to three months to put in place, with section 138 and section 701 clearances running in parallel (a 30-day statutory response each), and then needs 12 months of ownership.
• The realistic lead time for a new holding company is 15 to 24 months.

Cap and complexity. No cap. Very high complexity.

Relevance. Very high where a holding company already exists, which is common in businesses of this age. Low where one would have to be inserted shortly before a sale.

Structure 2: Family trust settlement

How it works. Before a sale process begins, each owner settles part of their shares into a discretionary trust for children and grandchildren.

• A lifetime gift into a trust is normally charged to IHT at 20% on value above the £325,000 nil-rate band.
• Shares in a trading company qualify for 100% BPR within each owner's £2.5m allowance, and that allowance covers transfers into trust. A settlement of shares within the allowance therefore carries no entry charge.
• The CGT on the gift is deferred by holdover relief under section 260 TCGA. The trustees take over the owners' original base cost.

What happens on the sale. The trustees sell the trust's shares to the buyer on the same terms as the owners. They pay CGT at 24% on the gain they inherited, then hold the cash for the beneficiaries.

Worked example. Each owner settles shares worth £2.5m, which is 5% of the company each or 10% in total. The allowance, not the size of the business, caps what can pass into trust.

Where the savings come from.

• £630,000 of entry charges avoided. Settling the same £3.8m as cash after completion (£1.9m per owner) would be taxed at 20% above each owner's nil-rate band, which is £315,000 per owner.
• £1.52m of IHT removed from the estates. After seven years, the £3.8m and all growth on it sit outside the owners' estates, where they would otherwise be exposed to IHT at 40%.
• Cost: periodic trust charges. Every ten years the trust's cash is charged at an effective rate of up to 6%, which is about £210,000 per decade on £3.8m.
• Earlier settlement moves more value. Before a sale process, a minority stake is valued at a discount, so more of the eventual proceeds pass into the trust within the same £2.5m allowance.
• CGT position unchanged. Each owner keeps well over £1m of gain personally, so BADR is still used in full.

Conditions.

• Ownership period. The settlor must have owned the shares for two years.
• Timing of the settlement. BPR does not apply to shares subject to a binding contract for sale. The settlement must be made before exchange of contracts, and in practice before heads of terms.
• Excluded beneficiaries. The settlor, the settlor's spouse and the settlor's minor children must be excluded from benefit. Otherwise holdover relief is unavailable and the gift-with-reservation rules apply.
• Seven-year period. Settlements count against the settlor's BPR allowance for seven years. If that period is not completed, the IHT on the settlement is recalculated without BPR, because the trustees no longer hold the shares. Term insurance covers this risk.

Timing. Six to ten weeks, including an independent valuation. There is no qualifying period after settlement, but the settlement must come before any binding contract. No clearance applies.

Cap and complexity. £2.5m of BPR allowance per settlor. High complexity, including trustee administration and Trust Registration Service compliance.

Relevance. Very high for owners in their fifties and sixties with estates above the nil-rate bands.

Outright gifts do not achieve the same result. Gifting shares outright to children before a third-party sale saves nothing. The children pay the same CGT on the sale, and for IHT the result is the same as gifting cash after completion.

Structure 3: Property carve-out

Why it matters. Long-established businesses often own their freehold premises, and sometimes property let to third parties. There are three reasons to separate property before a sale:

• Price: trade buyers often do not want to pay for property.
• Income: owners often want to keep the rental income.
• Reliefs: letting property to third parties is an investment activity that can undermine the trading status on which BADR, BPR and SSE all depend.

Routes and tax cost (£3m property):

Benefit. A demerger avoids up to £1.18m of tax compared with distributing a £3m property as a dividend. The owners keep the property, and its rent, through a separate company.

Why timing matters now. HMRC's June 2026 consultation proposes abolishing the capital-reduction demerger, which would leave the statutory route, currently rarely used, as the main option. The consultation closed on 14 September 2026, and the current route may close.

Timing. There is no qualifying period, but the carve-out must be completed before the sale. Degrouping charges need modelling where property moves within a group.

How it fits with the other structures. The carve-out is not an alternative to the holding company or the trust. All three can run together, but the order matters and there is one real trade-off.

• With a family holding company, the carve-out gets easier. Where a holding company is already in place, the property can be transferred up to it, or across to a sister company, at no gain and no loss under the group rules. A formal demerger may not be needed at all. Because the property leaves the trading company rather than arriving in it, the trading company is sold without assets transferred in, which is what degrouping charges attach to. Sequencing the holding company first therefore shortens the carve-out rather than adding to it.
• With a family trust, the carve-out comes first. The settlement is valued on the day it is made, and removing the property changes what the shares are worth. Carving out first, then valuing and settling, avoids settling a valuation that the carve-out is about to undo.
• The trade-off is inheritance tax. A company holding let property is an investment company and does not qualify for BPR. Value moved out of the trading company into it loses 100% relief and is exposed at 40%. On a £3m property that is a £1.2m exposure, against the £1.18m of dividend tax the carve-out saves. Where the premises are used by the trade and do not threaten trading status, leaving them in the company preserves the relief; where the property is genuinely let to third parties, the trading status argument usually decides the question anyway.

Cap and complexity. No cap. High to very high complexity.

Relevance. Very high. Property is the most common structural issue in companies that have traded for decades.

Part C: Reliefs and extraction before completion

C1. Business Asset Disposal Relief

BADR is a relief, not a structure. It applies where its conditions are met, but it must be claimed by the first anniversary of the 31 January following the tax year of the sale. It taxes gains of up to £1m per person at 18% instead of 24%.

Conditions, all met throughout the 24 months before the sale:

• at least 5% of the ordinary share capital and 5% of the votes;
• either 5% of profits and assets on a winding-up, or 5% of the sale proceeds;
• an office, such as a directorship, or employment with the company;
• trading status. HMRC treats non-trading activity above roughly 20% of assets, income or management time as an indicator of failure.

Value. Up to £60,000 per person, which is £120,000 for the couple in the example, or 0.24% of the sale value.

The planning element.

• Spouse. Each spouse has their own £1m limit. Shares can pass between spouses with no CGT, but the receiving spouse must then hold at least 5% and serve as a director or employee for 24 months before the sale.
• Checks for long-established businesses. Both spouses often already qualify. The work is checking three things:
  • whether either spouse has stepped back from the board within two years;
  • whether surplus cash or investment property threatens trading status;
  • whether any of the lifetime limit was used on an earlier sale.

C2. Pension contributions

Employer pension contributions are a tax-efficient way to extract value before completion. They are deductible for corporation tax and free of income tax and NIC.

Limits.

• The annual allowance is £60,000.
• Unused allowance from the previous three tax years can be carried forward, provided the individual was a member of a registered scheme in those years. That allows up to £240,000 per person in one year, or £480,000 for a couple.
• The tapered allowance can reduce the limit to £10,000 where income, including dividends, exceeds £260,000. The gain on the sale does not count towards this threshold.

Value. The right comparison is leaving the cash in the company: a buyer pays for it pound for pound, and the owner pays 24% CGT on it. Against that, a £240,000 contribution is worth about £30,000 to £65,000 per person, depending on the tax rate when the pension is drawn, after the 25% tax-free lump sum. For the couple, that is about £60,000 to £130,000.

Other points.

• Annual contributions carry on as normal. The pre-sale step is different: using up to three years of carry-forward in a single payment to move surplus cash out of the company. Owners who have maxed out every year have little carry-forward left, so the opportunity is largest where provision has been underfunded, which is common among those who reinvested profits for decades.
• The timing constraint is pricing, not completion. The contribution has to be made before the price is fixed, which means before heads of terms, or before the locked-box date where the deal uses one. After that point the buyer has already priced the cash, and a contribution simply reduces what the sellers receive.
• Contributions must also fall in the intended tax years and be paid while the company still holds the cash.
• The minimum pension access age rises from 55 to 57 in April 2028.
• Unused pension funds come within IHT from April 2027.

Part D: Timetable and interactions

D1. Summary of the three structures

D2. How the structures combine

• Holding company and a move abroad: the gross proceeds stay invested, and distributions taken after more than five years of non-residence generally fall outside UK income tax.
• Holding company and trust settlement: these work together, but only if the trustees stay outside the share exchange. If the holding company acquires every share, the trustees end up holding shares in it rather than cash, and receive nothing when the trading company is sold. Structuring the exchange so the holding company acquires the owners' shares alone, leaving the trust with its direct stake in the trading company, means the buyer purchases from both: the holding company's shares under the substantial shareholding exemption, and the trust's shares with CGT at 24%. The exemption needs only a 10% holding, so the holding company taking less than 100% does not put it at risk.
• Trust settlement and BADR: each settlor keeps at least £1m of gain personally, so the BADR limit is still used.
• Property carve-out and pensions: a self-administered pension scheme can buy the premises and receive the rent tax-free.

D3. Sequencing against the sale process

The timetable depends on one question: whether a structure with a statutory qualifying period is being used. The holding company has a 12-month period, which sets the earliest credible completion date. The trust settlement has none, so a process can launch as soon as the shares are settled. Both charts below start in September 2026 and are illustrative; what matters is the order and the gaps, not the dates.

Route A: holding company. This is the structure with the larger tax benefit and the binding qualifying period. The 12-month hold must run before the sale, but not before the process. Launching six months in means the clock and the process overlap rather than run end to end.

Route B: trust settlement without a holding company. With no qualifying period to run, the constraint is sequence rather than waiting. The shares must be settled before any binding contract for sale, and ideally before a process starts, so the valuation still carries minority discounts. Everything therefore lands on the settlement date, and the process begins straight afterwards.

Route B completes nine months earlier. That gap is the real cost of the holding company, and it is the trade-off to put in front of owners: nine months of delay and market risk against £12m of CGT left invested rather than paid at completion.

One caveat on Route B. A two-month property carve-out assumes the simpler route, such as a sale of the premises to the owners' pension scheme, which takes six to ten weeks. A demerger needs three to six months including clearance, and where one is required the settlement and the process launch move back accordingly.

Two points apply to both routes. BADR is a check rather than a workstream, because eligibility is automatic where the conditions are met and the 24-month period has usually been running for years. It only becomes a scheduling constraint where shares are being transferred to a spouse who does not already qualify, which starts a fresh 24 months and would then set the launch date. Separately, once the process launches the restructuring window has closed: any reorganisation from that point is assessed under the main-purpose test, clearances become harder to obtain, and buyers read an unfinished restructuring as a reason to retrade. That is why every structural bar on both charts sits to the left of the market process.

Neither chart shows the seven-year period that gives the trust settlement its full inheritance tax benefit. Where that matters, the settlement belongs three years or more ahead of a sale, not three months.

In short, tax preparation starts before buyers are approached. If a buyer's due diligence finds a restructuring half-completed, the buyer will price in the risk or ask for indemnities.

D4. The 28 October 2026 Budget

The Autumn Budget is expected on 28 October 2026 and will be Chancellor John Healey's first. A CGT increase is reported to be the "front runner" among the revenue options being considered. One widely discussed proposal would align CGT rates with income tax rates of 20%, 40% or 45%. None of this has been confirmed.

In November 2025, both the cut to Employee Ownership Trust relief and the share-exchange changes took effect on Budget day. Anti-forestalling rules on unconditional contracts also limit the benefit of signing before a rate change and completing after it. Owners in a sale process should model outcomes under both current and higher rates, rather than bend the deal timetable around a date the legislation may not respect.

D5. Common errors

• Treating BADR as the centrepiece of the plan.
• Gifting shares outright to children before a third-party sale in the expectation of a tax saving.
• Settling shares into trust after a binding contract, when BPR is no longer available.
• Treating a holding company as a guaranteed saving without a planned extraction route.
• Inserting a holding company within 12 months of a sale, or without clearance.
• Leaving let property or surplus cash in the trading company.
• Discovering at due diligence that the base cost is unknown or that part of the BADR limit has already been used.

Appendix: Alternatives and structures of limited relevance

Employee Ownership Trust (an alternative to a third-party sale). Since 26 November 2025, sales to an EOT receive 50% CGT relief rather than 100%. For higher-rate taxpayers that is an effective rate of 12%, and BADR cannot be claimed on the taxable half. The price is capped at market value and is usually paid over five to seven years.

EIS reinvestment. A gain can be deferred by reinvesting in EIS shares between one year before and three years after the sale. For 2026/27, EIS gives 30% income tax relief on up to £1m of investment, or £2m where part goes into knowledge-intensive companies. It suits only sellers who intend to invest in early-stage, high-risk companies.

Investors' Relief. This applies to new ordinary shares subscribed for cash and held for three years by someone who is not an officer or employee of the company. The rate is 18% on up to £1m of lifetime gains. Long-established companies rarely issue new shares, and the three-year holding period rules the relief out once a sale is in view.

EMI options for managers. From 6 April 2026, the EMI employee limit doubled to 500 and the gross asset limit rose from £30m to £120m. For managers exercising EMI options, the BADR period runs from the date of grant, and the 5% test does not apply. Options therefore need to be granted at least two years before completion.

Glossary

Working with Deal Ascent

This guide reflects legislation and published HMRC guidance as at September 2026. It is general information, not tax advice, and specific structures should be reviewed by a qualified tax adviser before implementation. Deal Ascent advises on the sale process and works alongside clients' tax and legal counsel.

Sources

• BDO: Business Asset Disposal Relief
• Brodies: BADR changes from April 2026
• Price Bailey: APR/BPR changes
• HMRC SVM111020: BPR allowance
• ICAEW: share exchange changes
• Travers Smith: distributions consultation
• HMRC CG53080B: SSE aggregation
• BDO: Leaving the UK
• Saltus: Autumn Budget 2026