Retire from your business

What you need to decide

You can retire from your business by selling it, passing it to family, selling it to your employees, keeping it while someone else runs it, or closing it. The right choice depends on what the business is worth, whether someone is ready to take it over, how much money you need from it, and what you want for your staff and customers.

Start planning well before your target date. Most routes take months to complete, and several tax reliefs depend on conditions you must meet for 2 years before you act.

Sell the business

Selling to an outside buyer, a competitor or your managers usually gives you the most money on the day. You pay Capital Gains Tax on the gain. Business Asset Disposal Relief can reduce it, but at current rates only if the gain would otherwise be taxed at the higher rate of Capital Gains Tax. If your employees transfer to the buyer, you must inform them, and consult them about any changes you plan, under TUPE. Buyers often ask you to stay on for a handover period and to accept restrictions on competing.

Pass it to family

A gift or a sale at a low price to a family member is taxed as if you had sold at full value, but gift hold-over relief can postpone the Capital Gains Tax. For Inheritance Tax, Business Relief can reduce or remove the tax on the business if you die, including on a business you gave away in the 7 years before your death, as long as your family still owns it.

Sell to your employees

Selling a controlling interest in your company to an Employee Ownership Trust keeps the business independent and rewards your staff. You get Capital Gains Tax relief on part of the gain, and the company can pay employees bonuses free of Income Tax up to a yearly limit, though National Insurance is still due on them. The trust usually pays you over several years out of the company's profits, so you carry some risk after you leave.

Keep the business and step back

You can keep ownership and appoint a manager or new directors to run it, taking dividends or partnership profits as income. You stay responsible as the owner, and as a director or partner if you keep that role. If you are a sole trader, the business stays in your name and you stay personally liable for it, so this route usually suits a company or partnership better.

Close the business

If no one will take the business on, you can stop trading and close it. A sole trader tells HMRC they have stopped being self-employed. A partnership is dissolved under its agreement. A company with money left over is usually closed by striking it off or, where there are larger sums to take out, by a members' voluntary liquidation. You must deal with final tax returns, VAT and PAYE, and treat staff fairly, including redundancy pay. Assets you sell within 3 years of stopping trading can still qualify for Business Asset Disposal Relief.

Your own finances after you retire

Your State Pension and any personal or workplace pension are separate from the business. If you draw a pension while you are still paid by the business, or take a large lump sum from a sale, the tax on each can interact. Ask an adviser to plan the timing of the sale, any payments spread over later years, and your pension withdrawals together.