Preparing a business for sale ideally starts two to three years before you want to exit. That gives you time to improve profits, tidy up the paperwork, reduce reliance on you personally and make sure the tax position is as efficient as possible.
Buyers pay for sustainable profit and low risk. The more clearly you can show both, the better the price is likely to be and the smoother the sale.
What buyers look for
- Consistent, well-documented profits, with a clear explanation of any one-off items.
- A spread of customers rather than reliance on one or two.
- A team and processes that can run the business without the owner.
- Contracts, leases and intellectual property that are in order and transferable.
- No hidden liabilities, such as unresolved tax issues, disputes or poorly documented employment arrangements.
Get the numbers in shape
Many small businesses are valued as a multiple of maintainable profit. Anything that reliably increases profit therefore increases value by a multiple of that amount.
Make sure your accounts are timely and accurate, with monthly management accounts that agree to the year-end figures. Keep personal and business spending separate. Identify costs that would not continue under a new owner, such as an above-market salary or family members on the payroll, and keep evidence so they can be adjusted for in the valuation.
A buyer's due diligence will test the figures. Problems discovered late often lead to price reductions, retentions or extra warranties, or to the buyer walking away.
Reduce dependence on you
If customers, suppliers and staff all deal with you personally, a buyer is buying a business that may not survive your departure. Building a management layer, documenting how things are done and introducing key customers to other members of the team all make the business easier to sell. Otherwise a buyer may insist on a long handover or link part of the price to future performance.
Tidy up the paperwork
- Bring the company's statutory registers and Companies House filings up to date.
- Check that past share issues and transfers were properly documented.
- Put written contracts in place with key customers, suppliers and staff.
- Confirm whether property leases can be assigned or will continue after a change of control.
- Resolve any outstanding disputes or HMRC enquiries.
Plan the tax
Business Asset Disposal Relief
Business Asset Disposal Relief reduces the capital gains tax rate on qualifying gains up to a lifetime limit of £1 million. The rate is 18 percent for disposals on or after 6 April 2026, up from 14 percent in 2025/26. Gains above the limit are taxed at the normal rates of 18 percent or 24 percent.
On a sale of shares, the conditions must normally be met for at least two years up to the date of sale: you hold at least 5 percent of the ordinary shares and voting rights, you are an employee or officer of the company, and the company is a trading company. Each shareholder has their own lifetime limit, so the position of a spouse or other family shareholder should be checked well in advance.
A worked example
A shareholder sells their shares in a trading company in 2026/27, making a gain of £1,403,000. They qualify for Business Asset Disposal Relief and their basic rate band is already used by other income.
- Annual exempt amount of £3,000, leaving £1,400,000 taxable.
- First £1,000,000 at 18 percent: £180,000.
- Remaining £400,000 at 24 percent: £96,000.
- Total capital gains tax: £276,000.
Without the relief, the whole £1,400,000 would be taxed at 24 percent, giving £336,000. The relief saves £60,000.
Inheritance tax after the sale
Shares in an unquoted trading company can qualify for business property relief from inheritance tax. From 6 April 2026, 100 percent relief is capped at £2.5 million of combined business and agricultural property per person, with 50 percent relief above that. Once the business is sold, the cash proceeds do not qualify and form part of your estate, potentially taxable at 40 percent. Estate planning is best considered alongside the sale rather than afterwards.
Structure of the deal
Whether the buyer purchases your shares or the company's assets, and whether part of the price is deferred or depends on future performance, affects how and when you are taxed. Take advice before agreeing heads of terms, because the structure is much harder to change later.
What to do
- Decide on a realistic timescale for your exit and work back from it.
- Get monthly management accounts in place and review profitability.
- Check that each shareholder meets the Business Asset Disposal Relief conditions and will do so for the two years before the sale.
- Start reducing the business's reliance on you.
- Take tax and legal advice before agreeing terms with any buyer.
If you are thinking about selling in the next few years, book a free call to talk through the preparation.
