Last updated: 16 Mar 2026 10:00 Posted in:
For many business owners, there comes a defining moment – often years or decades after founding their company – when they decide it’s time to step back. Whether motivated by retirement or the desire to pursue new opportunities, the challenge is how best to realise the value they have built.
One option is solvent liquidation, which allows profits to be extracted in a tax-efficient way while the company is wound down. However, where the business can operate without its owner, a sale is often preferable. As well as being tax efficient, selling a business can maximise its value, preserve jobs and ensure business continuity.
We explore the key benefits of selling a business and the critical considerations needed to advise clients with confidence.
The main business exit options
Broadly speaking, UK business owners have three exit strategies.
1. Asset disposal and informal closure
Sometimes the most practical exit route is to sell assets individually before informally closing the business. This approach works best when the company is not saleable – perhaps due to poor economic conditions – when the owner wants a quick exit, or when assets are worth more individually than as part of a trading entity.
Under this route, the owner must value and sell the assets before applying for Strike Off. Assets are commonly sold at auction, through trade publications or directly to competitors. If certain assets do not sell, the owner may consider purchasing them at market value, provided the company is solvent and financially healthy.
For smaller businesses with assets and retained profits under £25,000, this can be a cost-effective option. The owner can apply for Strike Off themselves, avoiding liquidator fees. Where retained profits exceed £25,000, a formal closure procedure called a Members’ Voluntary Liquidation may be more appropriate, as distributions are taxed as capital rather than income. In some cases, the owner may qualify for business asset disposal relief, reducing the overall tax liability.
2. Liquidation
If the company is solvent and holds £25,000 or more in retained profits, a Members’ Voluntary Liquidation may be the most suitable approach.
A Members’ Voluntary Liquidation requires the appointment of a licensed insolvency practitioner, who takes control of the company, realises its assets and completes the closure process on the owner’s behalf. The insolvency practitioner will charge a fee for their work. However, this is typically covered by the proceeds of asset realisations, rather than being paid upfront in full by the owner.
The key advantage of a Members’ Voluntary Liquidation over an informal asset sale and Strike Off is tax efficiency. All proceeds – not just the first £25,000 – are taxed as capital. Where the owner qualifies for business asset disposal relief, this can result in a capital gains tax flat rate, making a Members’ Voluntary Liquidation the most tax-efficient way to close a profitable business when a sale is not viable.
3. Business sale
Some businesses cannot operate without the skills, knowledge or experience of their owners. However, where a company can trade successfully under new ownership, selling it is usually the most effective way to maximise value.
A business sale allows the owner to realise the value of both tangible assets and key intangibles, such as goodwill, brand strength, customer relationships and future earnings. While professional fees – including those for a transfer agent and solicitor – will apply, these are typically outweighed by the higher sale price achieved. Buyers may include competitors, market entrants and private investors.
When selling a business, the owner will pay capital gains tax on the profit, but they may be able to claim business asset disposal relief to reduce their liability.
How to structure a cost-effective business sale
As an accountant, you can play a pivotal role in structuring a business sale to minimise costs and achieve the best possible result for your client. The following steps are key.
Selling a business should never be rushed. Proper preparation can significantly increase both its attractiveness and its value.
Start your preparation by producing a clear, comprehensive financial pack for prospective buyers. This should include at least three years of profit and loss statements, balance sheets, cash flow information, management accounts, and supporting tax and compliance records. Together, these documents will underpin the valuation and help to build buyer confidence.
You should also work to strengthen the balance sheet by removing obsolete stock, correcting debtor positions, resolving contingent liabilities and normalising earnings. Stripping out one-off or discretionary costs presents a clearer, more credible picture of sustainable profitability.
Tax considerations are central to determining the most appropriate exit strategy. When preparing for a business sale, accountants should carefully assess:
● the capital gains tax position, based on total gains and the owner’s income tax band;
● eligibility for business asset disposal relief and the impact of the lifetime limit; and
● whether a share sale or asset sale delivers the most tax-efficient outcome.
A business sale can be structured in one of two ways: a share sale or asset sale.
Share sale: A share sale involves selling the company in its entirety, including all assets and liabilities. This is often the seller’s preferred option, as it typically maximises value and enables a clean, single transaction. However, it may not be appropriate where parts of the business are underperforming or where there are liabilities the buyer is unwilling to assume.
Asset sale: An asset sale allows the buyer to cherry-pick the desirable assets while leaving liabilities and unwanted assets behind. However, it can be less tax efficient for the seller, as they pay corporation tax on the asset disposal and may also incur capital gains tax when extracting the remaining profits.
Why business sales make smart exits
Selling a business can be one of the most rewarding ways for an owner to realise the value of their investment and years of hard work. Financially and operationally, a sale as a going concern will almost always outperform liquidation. And even if business sales are not your usual area of expertise, with the right preparation and guidance you can still help your clients to achieve a smart and successful exit.
Author bio
Paul Williamson
Managing Director
Selling My Business
"Even if business sales are not your usual area of expertise, with the right preparation and guidance you can still help your clients to achieve a smart and successful exit."
Paul Williamson, Managing Director, Selling My Business