Chris Kelly, Jacobs Allen director in Bury St Edmunds, explains when it’s the best time to sell a business

The UK’s changing Capital Gains Tax regime has had a profound effect on business owners over the years, influencing their decisions on the timing of when to sell their business.

In the recent Budget it was announced that the lower rate of Capital Gains Tax available under Business Asset Disposal Relief will rise from 10% to 14% from April 2025 and to 18% from April 2026.

When deciding to change the ownership of your company, we would always advise that the ‘tax tail’ should not wag the dog!

Embarking on a business sale is not a decision to be taken lightly. It involves many steps and rushing a transaction can lead to unnecessary financial, legal, and operational risks.

Here are 7 reasons why taking time to undertake Exit Planning is essential:

1 Finding the Right Buyer A smoother transition and better long-term outcomes for employees and customers are achieved by taking time to find the buyer. Most founders consider maintaining their legacy is an important objective for them.

2 Competitive bidding Sellers have much better negotiation power if time has been taken to reach more potential buyers and competitive tension is created and is more likely to produce the best offers.

3 Emotional Readiness Selling a business is a major decision and the emotional aspect is often overlooked. Great deals from ideal buyers are sometimes aborted at the last minute because the seller struggles to cope with the transition of letting go of their business. Plans for their life post-sale such as continuing on a part-time basis should be considered at an early stage.

4 Market Conditions Trying to sell at the wrong time can end up with no buyers or a lower sales price. Understanding sector cycles and market conditions by accessing detailed research is crucial in getting the timing right for a sale.

5 Maximising Valuation Exit planning allows you to identify and spend time to resolve the risks which affect the attractiveness of the company to potential purchasers thereby increasing the potential value of the business.

6 Tax Planning Whatever the tax regime at the time tax planning should be carefully considered and advice taken. Proposed deal structures need to ensure the most effective tax rate is achieved and also fits in with your financial goals.

7 Due Diligence Buyers conduct thorough due diligence after their initial offer. If potential deal breakers are identified by them such as worrying financial results, operational weaknesses or ongoing disputes they are likely to want to reduce their offer or even to pull out. It is therefore important to have identified these in good time to rectify them as far as possible before marketing for sale.

Starting the process as early as possible with an experienced adviser will give you the most options and the best outcome.

Chris Kelly, Director