Beyond the immediate financial windfall, a business sale fundamentally changes your wealth structure and creates new complexities for estate planning. Without careful consideration, you might unknowingly expose your family to substantial tax liabilities or fail to protect the wealth you’ve worked so hard to build. Here’s what you need to know about adjusting your estate planning following a business sale.
A critical step at a critical time
Many business owners are so focused on the sale process that estate planning becomes an afterthought. However, the transition from holding business assets – potentially protected by Business Relief (BR) – to holding cash or investment assets can dramatically alter your tax position overnight. Addressing estate planning concurrently with your business sale preparations ensures your wealth remains protected during this vulnerable transition period.
The window immediately following a sale is crucial. Acting promptly allows you to implement tax-efficient structures before your wealth becomes subject to different taxation rules. Without proper planning, your estate could face significant Inheritance Tax liabilities that might have been mitigable with foresight.
Increased wealth, increased complexity
When your business converts to liquid assets, your estate planning needs become more sophisticated. You will probably need to consider:
- investment strategies that balance growth with tax efficiency
- structures that can accommodate diverse assets, including property, investments, and cash
- frameworks for potential future business ventures
- protection mechanisms against potential creditors or claims
- philanthropy and charitable giving options
The complexity often necessitates a team approach involving financial advisers, tax specialists, and legal professionals who understand the interconnected nature of these factors. This collaborative approach ensures that each decision considers both short-term and long-term implications for your estate.
Mitigating Inheritance Tax
One of the most significant changes following a business sale is the potential loss of Business Relief. This valuable relief can provide up to 100% exemption from Inheritance Tax (IHT) on qualifying business assets. Once your business is sold, the proceeds typically become fully liable for Inheritance Tax at 40%.
From April 2026, only the first £1 million of combined business and agricultural property will qualify for 100% relief. Assets exceeding this threshold will receive only 50% relief, resulting in an effective Inheritance Tax (IHT) rate of 20% on those assets.
Proactive planning might include:
- investing in other BR-qualifying assets
- establishing Family Investment Companies (FICs)
- making lifetime gifts to family members or trusts
- exploring pension contributions as a tax-efficient vehicle
- considering philanthropic structures that align with your values
The key is creating a strategy that balances your need for access to capital with your desire to mitigate tax exposure. Each option carries different implications for control, flexibility, and tax efficiency that must be weighed against your personal circumstances.
Protecting your legacy
Beyond tax matters, selling your business often leads to reflection about your legacy. Without the business as your main way of making an impact, you might want to set up new ways to ensure your wealth reflects what you value and intend.
This might involve:
- creating structures that protect assets from creditors, divorce, or poor decision-making
- establishing governance frameworks for how wealth will be managed across generations
- documenting your wishes regarding both financial and non-financial aspects of your legacy
- considering how to balance provision for your immediate family with broader societal impact
A thoughtful approach encompasses not just what you leave behind but how it will be managed and the impact it will have. This is particularly important when significant wealth is involved, as it can either empower or potentially hinder future generations.
Planning for future generations
A business sale often means transferring wealth to family members who may not have the same business acumen or financial experience as you. Without proper guidance, sudden wealth can lead to poor decisions or family conflict.
You should consider clearly documenting your intentions for your family wealth, including creating staged inheritance plans that release funds at appropriate life stages and family governance structures that encourage communication about wealth. Talking to your financial adviser – and introducing them to beneficiaries – will enable you to make the right decision for you and your family.
These preparations help ensure that the wealth you’ve created through your business success becomes a positive force rather than a source of confusion or conflict for future generations.
Taking a balanced approach
Effective estate planning following a business sale requires balancing sometimes competing priorities. In the first instance, you need to ensure you have sufficient assets to maintain your lifestyle. This can be by protecting assets from unnecessary taxation and creating structures that embody both your values and your intentions. Allowing flexibility in your plans is also vital as you need to be able to adapt to changing circumstances.
The right approach will be highly personal, reflecting your unique circumstances, family dynamics, and goals. What works for one business owner may be entirely inappropriate for another.
Next steps
Following a business sale, consider scheduling a comprehensive estate planning review with professionals experienced in post-transaction wealth management. Be prepared to discuss not just the technical aspects of tax planning but also your broader goals and values.
With thoughtful planning, the proceeds from your business sale can provide security for your family while creating meaningful impact for generations to come. The effort invested in proper estate planning ensures that the legacy of your business success extends far beyond the sale itself.
Content correct at time of writing.
This article has been produced for information purposes only. It is not intended to be an invitation to buy or act upon the comments made. All investment decisions should be taken with advice, given appropriate knowledge of the investor’s circumstances and one must satisfy certain investor criteria before being considered eligible to invest. Any forward-looking statements and forecasted returns represent the current views of Mattioli Woods Limited and may be subject to change. Your capital may be at risk and past performance is not a guide to future returns. Mattioli Woods Limited is authorised and regulated by the Financial Conduct Authority.
