Business Exit Planning: What Owners Should Check

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Business Exit Planning Before the 2026 Budget: What Owners Should Check

For an owner-managed business, the value tied up in the company may represent years of work and a substantial part of the owner’s retirement fund. With the UK Budget set for 28 October 2026, it is understandable that owners considering a sale, succession or closure want to know whether to act sooner.

Business exit planning starts with the transaction you actually intend to make. The current Capital Gains Tax (CGT) rules, eligibility for Business Asset Disposal Relief (BADR) and the date a disposal takes place can all affect the amount you retain. The Budget may change those rules, but speculation alone is a poor reason to rush a sale or liquidation.

What are the current CGT and BADR rules?

BADR, formerly Entrepreneurs’ Relief, applies an 18% CGT rate to qualifying gains on disposals from 6 April 2026. The relief is subject to a £1 million lifetime limit on qualifying gains per individual. Gains outside the relief may instead be taxed at the main CGT rates of 18% or 24%, depending on the shareholder’s taxable income and other gains.

For a higher-rate taxpayer with £1 million of taxable qualifying gain and the full lifetime limit available, 18% rather than 24% represents a potential £60,000 difference. That is an illustration, not a saving every owner can claim: previous BADR claims, losses, the annual exempt amount and the facts of the disposal must be checked.

No future CGT or BADR rate change should be treated as certain before it is announced. A useful exit plan measures the impact of possible changes without allowing a hypothetical tax saving to dictate the commercial decision.

Check relief before agreeing the deal

Owning a company does not automatically make a share sale eligible for BADR. For a typical share disposal, the company must be a trading company or the holding company of a trading group. The shareholder must generally have been an employee or office holder and satisfy the personal company tests throughout the relevant two-year period. Those tests include at least 5% of ordinary share capital and voting rights, alongside an economic interest requirement.

The details can change the answer. A share issue may dilute a founder’s holding; accumulated investment assets may raise a question about trading status; and a shareholder who previously used some of their £1 million lifetime limit will have less relief available. Where the company ceased to trade, a disposal within three years may still qualify if the relevant conditions were met before cessation.

It also matters what is being sold. Selling shares gives the shareholder a potential capital gain. If the company sells its own trade or assets, tax may arise in the company and a separate tax question arises when the proceeds are paid to shareholders. Model the transaction that is actually proposed, including deal costs and any deferred consideration

A sale date is not always the completion date

Owners aiming to transact before a Budget need to establish the tax disposal date, not assume it is the day the money arrives. Under the usual CGT rule, an unconditional contract generally fixes the disposal date when it is made; for a conditional contract, it is generally when the conditions are satisfied. Deal documents, timing and any applicable special rules need specific advice.

An exit already negotiated on sound terms may be worth progressing promptly. Selling at a discount, accepting poor buyer terms or forcing a restructuring to beat a rumoured tax change can cost more than the tax difference.

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Closing a solvent company: consider the whole liquidation

If a company has ceased trading and has cash or assets to return, a members’ voluntary liquidation (MVL) may offer an orderly closure. A licensed insolvency practitioner acts as liquidator. The directors must make a formal declaration, after reviewing the company’s affairs, that its debts including interest can be paid in full within 12 months.

Ordinary distributions of net assets in a winding up are generally treated as capital receipts for shareholders, and BADR may apply if its conditions are met. Starting an MVL before 28 October does not by itself secure a particular tax rate. Capital distributions can be made on different dates, and the relevant CGT disposal date is generally when the shareholder receives or becomes entitled to each distribution. Review the likely timetable with the liquidator and tax adviser.

An MVL also needs scrutiny where the shareholder intends to carry on the same or a similar trade. Under the targeted anti-avoidance rule, a winding-up receipt may be taxed as income if the statutory conditions are met, including involvement in a similar trade within two years of the distribution and an income tax advantage being a main purpose of the winding up. Continuing to work does not automatically trigger the rule; the full facts and purpose matter.

What should business owners do before 28 October?

The most useful preparation is a short, decision-focused review:

Confirm your route: share sale, company asset sale, family succession or solvent closure. Each produces different tax and commercial outcomes.
Test BADR for each shareholder: check share rights, employment status, trading history, the two-year period, previous claims and any cessation date.
Model the net proceeds: calculate the outcome under current rules, then test reasonable alternative tax scenarios alongside price, costs and deal risk.
Check the timetable: review contract conditions, likely completion and, for an MVL, the dates distributions are expected.
Record the commercial reason: document why the exit makes sense even if the Budget leaves tax rates unchanged.

Consider two owners with identical headline sale prices. If one is selling shares that qualify for BADR and the other is selling assets through the company, their after-tax proceeds may differ substantially. Establishing the transaction structure and relief position early is more useful than guessing what the Chancellor will announce.

Plan the exit you want to make

The 2026 Budget is a reason to check your position now, particularly if a sale, retirement or MVL is already under consideration. It is not a reason to accept a weaker deal or close a viable business without a clear plan. Good business exit planning shows what you would receive under the current rules, where the relief risks sit and which decisions can sensibly wait until 28 October.

If you are considering an exit, Naail & Co can help you review the tax position and identify the questions that need answering before you commit. Get in touch with Naail & Co to book your free initial consultation.

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Frequently Asked Questions About Business Exit Planning

What is business exit planning for a UK company owner?

Business exit planning is the process of deciding how and when to leave or transfer a business while protecting its value and understanding the tax consequences. It may involve a share sale, family succession, a company asset sale or a solvent closure. Start with your commercial goals and likely net proceeds, then test whether tax and transaction costs change the best route.

How does Business Asset Disposal Relief affect business exit planning?

Business Asset Disposal Relief (BADR) can reduce Capital Gains Tax (CGT) on qualifying business gains to 18% for disposals from 6 April 2026, subject to a £1 million lifetime limit per individual. Relief is not automatic. For a share sale, check the shareholder’s rights and role, the company’s trading status and the usual two-year qualifying period before relying on it.

When should business exit planning start if I am considering a sale before the 2026 Budget?

Start as soon as a sale becomes a realistic possibility, particularly if you hope to transact before the Budget on 28 October 2026. Confirm the proposed deal structure, BADR eligibility, valuation and likely tax disposal date before agreeing terms. An unconditional contract can fix the CGT disposal date before completion; a conditional contract is generally treated differently. A rushed sale must still make commercial sense if tax rules remain unchanged.

Can you claim BADR if your company has already stopped trading?

Yes, a shareholder may still qualify if the shares are disposed of within three years of the company ceasing to be a trading company, provided the relevant conditions were met before cessation. For a capital distribution during a winding up, the timing and qualifying history also matter. Establish when trading ceased and review what the company has done since; its current cash balance alone does not establish eligibility.

Do I need a members’ voluntary liquidation as part of business exit planning?

Not necessarily. A members’ voluntary liquidation (MVL) is one route for closing a solvent company and returning its remaining assets to shareholders. It requires a licensed insolvency practitioner and a formal declaration that the company can pay its debts in full, including interest, within 12 months. Compare its fees and expected tax treatment with other lawful closure routes before deciding.

A share sale generally gives the owner a personal capital gain, which may qualify for BADR. In an asset sale, the company sells its trade or assets, so tax may arise within the company; paying the proceeds to shareholders can create a separate tax charge. Buyer preferences, liabilities transferred and the offered price may differ too. Compare the after-tax proceeds of the actual options, not just their headline prices.

How much does business exit planning cost, and is it worth paying for advice?

The cost depends on the work required. Checking one shareholder’s BADR position is a narrower task than advising on a sale involving several shareholders, a group restructuring or an MVL. Legal, valuation and insolvency practitioner fees may be separate. Ask for a written scope and fee before commissioning detailed work. The value of advice lies in avoiding a material tax error or a commercially weaker deal.

Is it possible to start an MVL before the Budget and secure today’s CGT rate?

Starting an MVL before 28 October 2026 does not, by itself, secure today’s CGT rate. The liquidator may make capital distributions later, and the CGT disposal date for a distribution is generally when the shareholder receives it or becomes entitled to it. The effect of any Budget change will depend on the legislation announced. Check the expected distribution timetable before making an irreversible closure decision.

Why do the anti-phoenixing rules matter when planning a company exit?

The rules can treat a winding-up receipt as income rather than capital where all statutory conditions apply. Those conditions include involvement in the same or a similar trade within two years of the distribution and an income tax advantage being a main purpose of the winding up. Continuing to work does not automatically trigger the rule. Review the reason for liquidation and your intended next business activity before relying on capital treatment.

When must I claim BADR after selling or closing my business?

BADR must be claimed; it is not applied automatically. HMRC’s deadline is the first anniversary of 31 January following the tax year of the qualifying disposal. For a disposal in 2025/26, the deadline is 31 January 2028; applying the same rule to 2026/27 gives 31 January 2029. Keep evidence of the qualifying conditions and establish the correct disposal date, especially for a conditional sale or staged MVL distributions.