How to sell a business: the two decisions that set what you keep

Selling a business comes down to two decisions you make early and live with for years. The first is whether you sell your shares or the company sells its assets, because that single choice moves the tax, the debt, the staff, and the VAT. The second is whether the buyer in front of you can actually fund the price they have offered. The valuation, the data room, and the paperwork all follow from those two. Get them right and selling a limited company is a long administrative process with a shape you can see. Get them wrong and you find out at completion, when changing them is expensive.

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Sell the shares or sell the assets

There are two ways to sell a trading limited company. In a share sale you sell your shares, and the company carries on as it is under a new owner. In an asset sale the company sells its trade and chosen assets, and the company itself stays with you.

That difference decides six things, and most of them cost money:

The employee rules show the difference most clearly. For staff to be protected when a business changes hands under the Transfer of Undertakings (Protection of Employment) regulations, usually called TUPE, GOV.UK says 'the identity of the employer must change'. In a share sale it does not: the same company employs the same people on the same terms, and all that moves is who owns it. In an asset sale you are handing your people to a different employer, which brings information and consultation duties with it.

VAT is the one people assume they can choose, and they cannot. Selling the assets of a VAT-registered business is normally a taxable supply. No VAT is chargeable if the sale meets the conditions for a transfer of a going concern, but HMRC is clear that those rules are mandatory rather than an election. You work out from the outset whether the sale qualifies. A share sale never raises the question at all, because the assets never leave the company.

The sting in an asset sale is that the money lands in the wrong place. The company makes the gain, so the company pays corporation tax on it: 25% above £250,000 of profit, or 19% up to £50,000, with marginal relief in between. Business Asset Disposal Relief is not open to companies at all. So the proceeds sit on the company's balance sheet, and you still have to get them out.

That is why most owners of a trading company want a share sale, and most buyers would rather take the assets and leave the history behind. Where you land is a negotiation, and a much better one to have before you agree a price than after.

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What Business Asset Disposal Relief is worth now

If you sell shares in your own trading company, you may pay a reduced rate of capital gains tax on the gain. The relief used to be called Entrepreneurs' Relief, which is why a lot of what is written about it is out of date.

To qualify on a share disposal, GOV.UK requires two things to have been true for at least two years up to the date you sell. You were an employee or office holder of the company. And its main activities were trading, or it was the holding company of a trading group.

Unless the shares came from an Enterprise Management Incentive, the company also has to have been your 'personal company' for those two years. That means you held at least 5% of the shares and 5% of the voting rights. You also had to be entitled to at least 5% of the profits available for distribution and the assets on winding up, or of the proceeds if the company were sold.

Two things catch owners out. The two-year clock runs to the date of the sale, so a restructure or a new share issue shortly before completion can break it. And the relief is capped at £1 million of qualifying gains across your lifetime, not per sale. If you have claimed before, you have less left than you think. Above the limit, a higher or additional rate taxpayer pays the main capital gains tax rate of 24% on gains made from 6 April 2026.

The rate itself has moved twice since April 2025, which is why the date on anything you read about it matters. On a £1 million qualifying gain it is the difference between three very different tax bills:

Plenty of guides, including some published by large and reputable firms, still quote 10%. If that is the figure you have been planning around, it expired on 5 April 2025. On a sale at the lifetime limit it understates your bill by £80,000.

The claim goes on your tax return. You have to make it by the first anniversary of the 31 January following the end of the tax year in which you sold. Our guide to capital gains tax for businesses works the calculation through. A sale of this size is also a good reason to put an accountant on it early rather than late.

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What to fix before a buyer's accountant looks

An offer either survives contact with the buyer's accountant or it does not. Due diligence tests your financial, legal, and tax records, your operations, and how the business is organised. Partly to check what you have told them, partly to find a reason to pay less.

What the price turns on is narrower than most owners expect: financial performance, the assets and liabilities on your balance sheet, growth potential, and the state of your market. Our guide to valuing a small business covers the methods and when each one flatters you.

The preparation that pays for itself is the dull kind:

• Clean up the accounts, so the numbers in them need no explaining.
• Settle or restructure what you owe, and know exactly what is left.
• Fix the operational problems you have been living with, because a buyer will find them.
• Get the key contracts signed, renewed, and in one place.
• Document the processes that live only in your head.
• Check you are meeting the compliance requirements for your sector.
• Review your pricing and your margins, and be able to defend both.

Diversifying your revenue and building the brand both raise what a business is worth, but they take years rather than months. If you are selling this year, the accounts and the contracts are where your time goes.

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Selling a company that still owes money

Owing money does not stop a sale. It changes who ends up with the debt, and that follows the structure. In a share sale the buyer takes the business with its liabilities, including its debts, unless you negotiate otherwise, and the price usually moves to reflect them. In an asset-only sale you generally keep the debt while the selected assets transfer.

Either way, be the one who raises it. Review your liabilities early, settle or restructure what you can, and disclose the rest. A debt a buyer turns up in due diligence costs you more than the same debt declared in the heads of terms.

Three things catch sellers out, and all three are easier to handle before the heads of terms than after.

First, a personal guarantee is a personal obligation, and selling the company does not end it. We ask for a guarantee from at least one director on every new iwoca Flexi-Loan, as most lenders do. Whether it can be released depends on the wording of the guarantee itself, so get the release agreed in writing as part of the deal rather than afterwards.

Second, if you secured any company finance against your own property, GOV.UK is explicit: you must tell the provider within 21 days of the sale.

Third, your director's loan account. If you owe the company money, expect the buyer to want it repaid at completion or taken off the price.

Where it is worth borrowing to tidy the balance sheet first, the arithmetic is short. We lend to UK limited companies. At our representative rate of 3.33% per 30 days, clearing a £20,000 supplier balance costs about £666 for the month – and you repay it when the sale proceeds land. Interest is charged only on what you owe, and there is never a fee for repaying early. You can run your own figures with the business loan calculator. The question worth asking is whether a month of interest costs less than the discount a buyer will want if that balance is still sitting there at completion.

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Finding a buyer who can actually pay

Most small companies sell to someone already in their orbit. The routes worth working are:

• A competitor who wants your market share, your customers, or your capacity.
• A customer or a supplier who would rather own that step in the chain than buy it.
• Your own management team, through a management buyout.
• A trade or financial buyer, found through an adviser or a marketplace.
• Your accountant's or solicitor's network, which is often better than it looks.
• Family or someone in your personal network, where succession is realistic.

Whichever route you take, release nothing until a non-disclosure agreement is signed. A buyer who will not sign one before seeing your financial statements, your customer list, or your supplier terms is not a buyer. Word of a sale unsettles staff, worries customers, and is useful to competitors, so release information in stages rather than all at once.

Then ask the question most guides skip: where is the money coming from? An offer is only worth what the person making it can raise. Deals this size die at financing more often than they die at price, usually after months of work. Banks are rarely the answer, because they will not generally lend against a small acquisition without property to secure it.

Our SME Expert Index, published in May 2025, found that 67% of finance brokers now recommend alternative lenders for applications over £100,000, against just 6% who recommend a high street bank. That bites hardest when the business is worth more than a buyer can fund out of savings, and above roughly £500,000 that is most of them. It bites hardest of all when the buyer is your own management team.

That gap is what manda by iwoca was built for – our marketplace for small-business sales, working with UK businesses typically valued between £500,000 and £10m. Your financials are verified and written up before you go to market, so there is less for a buyer's accountant to turn up. You are introduced only to buyers who have already been qualified. And the acquisition finance is structured as part of the deal rather than chased once an offer is on the table. Sellers pay a success fee when the deal completes, and nothing before that.

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Where sales go wrong after you shake hands

Heads of terms are not the end of the negotiation. Four things tend to cost sellers money between the handshake and the money landing.

Warranties. In a share sale the buyer will ask you to warrant the state of the company: accurate accounts, no litigation coming, tax affairs in order. A breach can be claimed against you personally, long after you have moved on. Your defence is the disclosure letter, because anything you properly disclose in it cannot be claimed against later. Disclose generously, and have your solicitor negotiate a cap on liability and a time limit.

Earn-outs. Part of the price is often deferred against future performance. The difficulty is that once the shares are sold, the buyer runs the business that has to hit the target, including the hiring, the spending, and the pricing. If an earn-out is in your deal, the protections around how the business is run matter as much as the figure itself. If you would rather be paid over time by agreement, seller financing is a structure in its own right.

Change of control. Major customer and supplier contracts often require the other side's consent, allow a renegotiation, or let them walk away when control of the company changes. That can bite in a share sale, where nothing else about the business moves at all. Read your biggest contracts before the buyer's solicitor does.

Director's loan accounts. Settle them deliberately, rather than finding them in the completion statement.

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What you have to do at completion

Selling the whole shareholding comes with a short list of duties that are easy to lose in the rush:

• Appoint the new directors before you resign as a director yourself, and tell Companies House.
• Decide whether to transfer the company's VAT registration number to the new owner.
• Where the company has sold only part of its business, tell the affected employees when and why, including any redundancy or relocation terms.

The order of the first one matters. A company left with no directors is a problem the buyer inherits and you created, so your successors go on before your resignation goes in.

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If no outside buyer appears

Not every company has a trade buyer waiting, and two routes keep the business going without one.

A management buyout sells the company to the people already running it. It keeps your confidential information away from competitors, leaves the culture broadly intact, and needs nobody brought up to speed. It usually comes together as a mix of the managers' own money, borrowing, and part of the price deferred and paid out of future profits. That is why the financing question matters here most of all.

An employee ownership trust buys a controlling interest and holds it for the benefit of all your employees. The tax treatment changed and most of what is written about it has not caught up. For disposals on or after 26 November 2025, HMRC's helpsheet confirms that half the gain is exempt from capital gains tax and the rest is charged under the normal rules. Before that date, the whole gain was exempt. You cannot claim Business Asset Disposal Relief as well. The relief can also be withdrawn if the trust stops meeting the conditions at any point in the four tax years after the one you sold in. So it needs setting up properly, by someone who has done it before.

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How long does it take to sell a business?

Longer than you expect, and there is no reliable published average for sales of UK small companies.

What sets the clock is how clean your financials are when you start, whether the buyer's funding is already arranged, and how long due diligence runs once it finds something. With the financials verified up front, manda's own target is three to six months from taking on a sale to a signed letter of intent.

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Do I need a broker to sell my business?

No, you can sell a limited company without one. But it takes real time, a grasp of the legal and financial side, and some skill at negotiating.

Going it alone can delay things and expose you to compliance missteps, or to missing a problem that surfaces later. A broker, an adviser, or a marketplace brings access to buyers and support with valuation and due diligence. Whether that is worth the fee depends on how much of it you can do yourself.

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Should I tell my staff before the sale?

Not until the deal is close to certain, and take advice on the timing. Early word unsettles the people you most need to stay.

What you owe them legally depends on the structure: a share sale changes nothing about their employment, while an asset sale moves them to a new employer and brings consultation duties with it. That is one more reason to settle the structure before anything else.

Speak to a solicitor and an accountant before you commit to either. This is a decision you make once, and almost all of it is easier to get right at the start than to fix at completion.

Sources

• Business Asset Disposal Relief on GOV.UK
• Business Asset Disposal Relief helpsheet HS275 on GOV.UK
• Employee Ownership Trusts and Capital Gains Tax helpsheet HS277 on GOV.UK
• Capital Gains Tax rates on GOV.UK
• Corporation Tax rates on GOV.UK
• Tax when you buy shares on GOV.UK
• Business transfers, takeovers and TUPE on GOV.UK
• Selling your business: your responsibilities on GOV.UK
• Transfer a business as a going concern, VAT Notice 700/9, on GOV.UK