Exit planning for business owners: How can I reduce my tax bill?

This short guide explains how BADR and other CGT reliefs work, who can qualify and why starting your exit planning several years before a sale could help you reduce your tax bill. 

What is exit planning? 

Exit planning is the strategic process of preparing to leave your business.  

Whether you want to retire, release money from the business to fund a new venture, or simply enjoy the fruits of all your hard work, planning ahead can help you achieve the best possible financial outcome for you. 

Many business owners only start thinking about their exit when they are ready to sell, but planning should ideally begin several years in advance. This gives you time to: 

Acting early can improve both the value of your business and the amount that stays in your bank account after tax. 

Business Asset Disposal Relief 

BADR, formerly known as Entrepreneurs' Relief, is the most common and valuable tax relief, for owner- managed business exits.   

If you qualify, gains on the sale of your shares or qualifying business assets may be taxed at 18% instead of the CGT rate of 24% for higher and additional rate taxpayers (2026/27) that many business owners would otherwise pay.  

BADR rates over time 

The relief applies to qualifying gains of up to £1 million over your lifetime. So, although the BADR rate has increased in recent years, the relief can still save you up to £60,000 in CGT. Note that prior to 11th March 2020, the lifetime limit was £10 million. 

Qualifying conditions 

You may qualify for BADR if you are a sole trader or business partner, have owned the business for at least two years before the sale and you sell: 

If you own shares in a limited company, you may qualify if: 

The qualifying conditions are detailed and depend on your individual circumstances, so it is important to take advice before planning an exit. 

If you acquired your shares through an Enterprise Management Incentive (EMI) share option scheme, different qualifying rules may apply. This means you could still qualify for BADR even if you do not meet the usual 5% shareholding requirement. 

Exit planning timeline 

Don’t assume that you will automatically qualify for BADR - the conditions are strict and should be reviewed by your accountant or advisor before you sell your business. 

If you are selling shares in your company, make sure you continue to meet the qualifying conditions throughout the two years leading up to the sale. This includes maintaining the required shareholding, remaining an employee or director and ensuring the company continues to qualify as a trading company. 

Changes to your shareholding, your role in the business or the activities of the company shortly before a sale could affect your entitlement to BADR.  

If there is more than one class of share in the company, you may need to review the shareholding condition more carefully to ensure you have at least 5% of the ordinary share capital by the various measures set out in the BADR rules.  

If the business has stopped trading, BADR may still be available on qualifying business assets sold within three years of the business ceasing. 

Other exit routes to be aware of 

Employee Ownership Trusts (EOTs)

If your business is structured as a limited company and not a sole trade or business partnership, an alternative way to exit your business is to sell your shareholding to an Employee Benefit Trust (EOT), for the benefit of the employees. This can be an attractive succession planning option for the right business, although the qualifying conditions are complex. 

This exit route can work well if employee-ownership is something that you and your employees are interested in. It can be a popular option if the business you wish to exit is a profitable company of which you are the majority shareholder, and you have a suitable employee or management team to take over the day to day running of the company.  

When EOTs were first introduced, any gains were fully exempt from CGT. From 26th November 2025, the CGT relief was capped at 50% meaning the effective rate is 14% as of 2026/27 (being 50% x 28%) 

Business relief for inheritance tax 

If your priority is passing your business to the next generation of your family rather than selling it, Business Relief for inheritance tax (often still referred to by the old acronym, BPR) may be relevant to you.  

BPR can reduce the amount of Inheritance Tax payable on qualifying business property in your estate following your death, although the rules changed significantly from 6th April 2026 to limit the value of qualifying property subject to 100% BPR to £2.5 million. The amount of relief available now depends on the type and value of the business property involved, so specialist advice is essential. 

Why exit planning advice matters 

HMRC may review claims for BADR and other reliefs, to ensure the conditions have been met. 

The qualifying conditions for BADR and other reliefs are detailed, and tax legislation can change over time. Planning several years before a sale gives you the best opportunity to maximise the value of your business and keep more of your hard-earned proceeds.  

How can TaxAssist Accountants help? 

At TaxAssist Accountants, we have extensive experience helping business owners to plan tax-efficient exits. We can: 

Call us on 0800 0523 555 or use our online contact form here. 

Last updated: 21st August 2026