Selling Your Business in 2025? Here’s What You Need to Know About Tax and Exit Options

Selling a business is a big moment. Whether you’re ready to retire, pivot to something new, or just fancy cashing in on all your hard work, it pays to understand your options — and the tax you might face.

In this blog, we explain the most common ways to sell or wind up a business in the UK, what the taxman wants to know, and how you can plan a smart, efficient exit.

Share Sale vs Asset Sale: What’s the Difference?

These are the two main ways to sell a business, and they work very differently.

Share Sale – Selling the company itself

You sell your shares in the limited company to a buyer. They take over the entire business — assets, debts, contracts, and all.

Pros	Cons
Can be tax-efficient (especially if you qualify for Business Asset Disposal Relief)	Buyer takes on your liabilities — so they’ll do deep due diligence
Easier for the buyer to keep things running (staff, suppliers, and branding all stay the same)	Can be harder to find someone willing to buy the whole company structure

Asset Sale – Selling the business bits

Instead of selling your shares, your company sells off its individual assets — like stock, equipment, contracts, brand name — and you keep the company shell.

Pros	Cons
You can keep specific parts of the business or liabilities	Not as tax-friendly — especially for limited companies
Often more appealing to buyers who don’t want your history (or baggage)	Transferring contracts, leases, or licences can be tricky

Liquidation: Closing the Business Down

Sometimes, there’s no buyer — or you simply want to shut the doors on your own terms.

Insolvent Liquidation

Used when the business can’t pay its debts.

• You sell off assets to pay creditors
• Usually, there’s little or nothing left for shareholders
• Can affect your reputation and credit history

Solvent Liquidation (Members’ Voluntary Liquidation / MVL)

Used when the business is healthy, but you want to shut down.

• You close the company and distribute its cash/assets
• Often used when retiring
• Can be very tax-efficient, especially if you qualify for Business Asset Disposal Relief (more on this below)

Other Business Exit Routes

If you’re not keen on selling to an outside buyer, there are still options:

• Management Buyout (MBO): Your current team buys you out
• Employee Ownership Trust: Transfer ownership to staff over time
• Private Equity Sale: Bring in investors who’ll grow and later sell the business
• Initial Public Offering (IPO): Float your company on the stock market (rare for SMEs)

How Tax Works When You Sell

This is where things get serious — because your exit could trigger Capital Gains Tax (CGT) or Corporation Tax, depending on how you structure the deal.

If You Sell Shares

• CGT is payable on the gain (sale price minus what you paid)
• If eligible, you may get Business Asset Disposal Relief (BADR)
• From 6 April 2025, BADR will tax the first £1 million of qualifying gains at 14% (up from 10%)
• Anything above that gets taxed at the standard CGT rate of 20% for higher-rate taxpayers

To qualify for BADR:
✔️ Must be an individual (not a company)
✔️ Must own at least 5% of the company’s ordinary shares & voting rights
✔️ Must have been a company director or employee for at least 2 years
✔️ Company must be trading (not investment-based)
✔️ Can’t sell and restart a similar business within two years (HMRC sees that as tax dodging)

If You Sell Assets Through the Company

• If you’re a sole trader, you pay CGT — and BADR may apply
• If you operate through a limited company:
  • The company pays Corporation Tax (currently 19%–25%) on any profit from selling assets
  • Then you’ll pay tax again when you take the money out (dividends, salaries, or liquidation), which may create double taxation

If you’re looking to take out a lump sum, a solvent liquidation might be more tax-friendly, especially if BADR applies.

BADR in a Solvent Liquidation (MVL)

This is a popular route for business owners ready to shut down and cash out.

If you qualify, you can pay 14% CGT on the first £1 million of gains when the company is closed and its assets are handed to shareholders.

To qualify:
✔️ You must be an individual who owns 5%+ of shares and voting rights
✔️ Must have been a director or employee for at least two years
✔️ The company must have been actively trading for at least two years
✔️ Liquidation must happen within 3 years of the business stopping trade
❗If you start a similar business again within 2 years, HMRC can apply anti-avoidance rules and tax your gains as income instead (higher rate)

Final Thoughts: What’s the Best Option?

It all depends on:

• Whether you’re selling the whole business or just part of it
• Whether you want to walk away completely, stay involved, or reinvest
• How much cash you want to take out — and how quickly
• Your tax position and eligibility for reliefs like BADR