Tax Strategies for Business Owners Over 55 Selling Their Company

Selling a business is a significant milestone, especially for business owners over 55 who are preparing for retirement or a new chapter in life. However, without careful tax planning, the sale could lead to unexpected tax liabilities that diminish your hard-earned profits. In this guide, we’ll explore effective tax strategies to help you maximize the financial benefits of selling your company.

Why Tax Planning Matters When Selling Your Business

When you sell a business, the profits are typically subject to Capital Gains Tax (CGT) in the UK. The rate and the amount you owe depend on several factors, including the structure of the sale, your personal tax situation, and the timing of the transaction. Strategic tax planning can significantly reduce your tax bill and ensure you keep more of your proceeds.

Key Tax Strategies for Business Owners Over 55

1. Utilise Business Asset Disposal Relief (BADR)

Formerly known as Entrepreneurs’ Relief, Business Asset Disposal Relief (BADR) allows qualifying business owners to pay a reduced CGT rate of 10% on gains of up to £1 million over their lifetime. To qualify, you must have owned the business for at least two years prior to the sale and meet other specific criteria.

2. Consider Gift Hold-Over Relief

If you plan to transfer your business to a family member or business partner, Gift Hold-Over Relief can help defer the capital gains tax until the new owner disposes of the business. This strategy is particularly useful for family succession planning.

3. Maximise Pension Contributions

For business owners over 55, pension contributions offer a dual benefit: reducing taxable income and boosting retirement savings. You can contribute up to £60,000 annually (as of 2025) and receive tax relief, potentially lowering your CGT liability.

4. Spread the Sale Over Multiple Tax Years

If possible, structuring the sale to receive payments over several tax years can help spread the capital gain, keeping you within lower tax brackets and reducing your overall tax bill.

5. Use Your Annual CGT Allowance

Every UK taxpayer has an annual CGT allowance (£6,000 for the 2025/26 tax year). If you and your spouse both own shares in the business, you can double this allowance by distributing ownership strategically before the sale.

6. Consider a Management Buyout (MBO)

An MBO can be a tax-efficient way to sell your business to your management team. You may be able to structure the transaction to take advantage of tax reliefs and defer tax liabilities.

7. Seek Professional Tax Advice

Tax laws are complex and subject to change. Engaging a tax professional with experience in business sales can help you identify the best strategies for your specific situation and avoid costly mistakes.

Common Mistakes to Avoid

• Ignoring Tax Implications: Failing to plan for taxes can lead to higher-than-expected liabilities.

• Not Using Available Reliefs: Make sure you qualify and apply for all applicable tax reliefs.

• Rushing the Sale: Proper tax planning requires time; starting early can save you significant money.

Conclusion

Selling your business as a business owner over 55 is a pivotal moment that requires careful planning, particularly when it comes to taxes. By leveraging available tax reliefs and strategic financial planning, you can maximize your sale proceeds and secure your financial future. For personalized advice, always consult with a tax professional who understands the intricacies of business sales and retirement planning.

Need Help with Your Business Sale?

At For Legacy, we specialize in helping business owners navigate the complexities of selling a business, including tax strategies, valuations, and exit planning. Contact us today to learn more about how we can support your journey.