Your Exit Will Be Taxed. Unless You Plan for It Now

Most construction and trades business owners I speak to are constantly reinvesting.

More tools. Better vans. Extra boots on the ground.

It feels like progress. But what's it all building towards?

If you're growing the business without a clear plan for your own future, you might reach the finish line with nothing to show for it except more stress.

Growth Doesn’t Guarantee a Clean Exit

You can increase turnover, expand the team, and still find yourself trapped when it's time to step back.

Whether you want to sell, pass it on, or just reduce your hours, your structure, not your sales, will determine how simple or painful that process is.

And tax? It will either work for you or against you.

Tax Isn’t Just a Bill. It’s a Planning Tool.

Most owners treat tax as something to reduce, delay, and ignore. But tax planning is about more than just saving money.

It’s about using the rules to:

• Extract profits efficiently
• Build wealth in and outside the business
• Avoid nasty surprises at exit
• Increase the value and attractiveness of your company

Here are five areas where better tax planning now can make your eventual exit smoother, safer and more rewarding.

1. Should You Set Up a Holding Company?

A holding company isn’t just for large corporates. More owner-managed trades businesses are using this structure to build and protect long-term wealth.

How it works:

• You create a holding company that owns your trading company
• Profits can be paid up as dividends, with no immediate tax
• The holding company can then reinvest or hold funds more securely

Why it helps:

• Separates trading risk from long-term assets
• Opens access to reliefs like Substantial Shareholdings Exemption if you sell
• Makes succession or sale planning more flexible

This setup needs to be done properly. Otherwise you risk triggering Stamp Duty or Capital Gains Tax. But once in place, it gives you far more control over how and when you build wealth.

2. Will You Qualify for Business Asset Disposal Relief (BADR)?

BADR allows you to pay just 10 percent (rising to 18 percent from April 2026) Capital Gains Tax on the first £1 million of lifetime gains when selling or winding down a business.

But it’s not automatic. You need to meet strict conditions:

• Own at least 5 percent of the shares
• Be a director or employee
• The business must have been actively trading for at least two years
• It must not be classed as an investment company

That last point is critical. Some construction and trades firms fail the trading test by holding property or excess cash.

BADR isn’t something you can fix six months before exit. If you want to take advantage of it, it needs to be part of the plan now.

3. Are You Paying Yourself the Right Way?

How you take money out of the business today affects how cleanly you can exit later.

Some things to watch:

• Director’s loans can cause tax problems if not dealt with before exit
• Excessive dividends might boost personal cash now but reduce business value later
• Pension contributions can reduce Corporation Tax and build wealth outside the business

If you’re within five to ten years of stepping back, now is the time to rebalance how income and long-term wealth are managed.

For some, a SSAS pension can be particularly useful. It allows the business to buy commercial premises, lend money back to the company, or support a management buyout, all within a tax-efficient wrapper.

4. Are You Building Income or Building Value?

Short-term income keeps the lights on. But long-term value is what makes your business worth something to you or someone else.

Value often comes from:

• Freehold property owned by the company
• High-quality equipment with resale value
• Strong systems or intellectual property
• Recurring contracts or long-term clients

From a tax angle, investing in plant, machinery or tools can qualify for capital allowances. This reduces your Corporation Tax while strengthening your asset base.

If a future buyer or successor looks at your business, these are the things that make it stand out.

5. What’s Your Exit Route, and Have You Planned for It?

Your exit could take several forms. Each comes with different tax consequences and planning steps.

Here are five common routes:

Sell to a third party

Often maximises value, but triggers Capital Gains Tax. BADR can help reduce the rate if you qualify.

Sell to your management team (MBO)

Can be structured through share buybacks or instalments. Requires strong retained earnings and a team ready to take over.

Sell to an Employee Ownership Trust (EOT)

If you want to reward loyal staff and avoid Capital Gains Tax entirely, an EOT could be a strong option. The business is sold to a trust that benefits the employees, and if structured properly, you could pay no CGT on the sale. It works best for stable, profitable companies with a solid second-tier team in place.

Pass to family

Can create CGT or Inheritance Tax exposure if not planned carefully. Gifting shares may sound simple, but tax implications can be significant without proper planning.

Wind down the business

If selling isn’t realistic, you can still extract funds in a tax-efficient way if the company qualifies for BADR. You’ll need to close operations, settle creditors, and go through a Members’ Voluntary Liquidation to get the benefit.

The earlier you start planning, the more choices you have. Legal structure, ownership, retained earnings, and profit extraction all shape what your exit looks like.

Final Thoughts

You don’t need a complex tax plan to cover every angle. But you do need clarity.

Ask yourself:

• What am I actually building here?
• If I wanted to step back in five years, what would need to change?
• Is my current setup helping that goal or making it harder?

Most business owners focus on growth first and structure later.

But if you're serious about creating options, not just working more, then your tax strategy needs to support your exit, not delay it.