In a nutshell

For business owners, retirement isn’t about stopping work at a set age – it’s about turning the value you’ve built into lasting income, on your terms. That means starting with the life you want, then structuring your exit strategy, profit extraction, and post-sale income plan early.

Done well, you’ll align tax, timing and investment strategy to give yourself clarity and control over the decades ahead. We’ve also written about the emotional side of stepping back – what life after retirement actually feels like once the business isn’t at the centre. Read that piece here for real stories and human insight.

The reality for business owners

For many business owners, the company is the pension. Years of profits have been reinvested, personal pensions are often modest, and the retirement plan is essentially: “I’ll sell one day, and that’ll sort it.”

Research from Rathbones confirms this, finding that 83% of family-run business owners are relying on their business to fund retirement. Yet despite this heavy reliance, research from Charles Stanley shows that 48% have no exit plan in place and 37% have no succession plan.  Many leave it too late, losing out on valuable tax reliefs or selling under pressure.

And post-sale, a surprising number struggle to replace the structure, cash flow and identity their business provided. This isn’t just a financial shift – it’s a strategic and personal transition that works best when planned years in advance.

Where people trip up

We see the same avoidable mistakes again and again:

• Leaving exit planning too late, often just a year or two before retirement.
• Assuming the sale alone will fund retirement, without modelling post-sale income properly.
• Missing Business Asset Disposal Relief (BADR) through poor timing or share structure.
• Extracting profits reactively, leading to avoidable tax drag.
• Underestimating post-sale complexity, especially if proceeds are received in stages or held in a company.
• Ignoring succession and legacy planning until the very end.

Most of these aren’t because people don’t care – they’re because the business has always come first. Exit, tax and retirement planning sit in separate mental boxes, when in reality they’re one joined-up strategy.

1. Start with life, not spreadsheets

For business owners, lifestyle planning often gets postponed indefinitely. The business is all-consuming, so thinking about “life after” can feel abstract or even indulgent. But clarity on what you want next is the single most powerful driver of a smart retirement strategy.

Before you decide when or how to exit, get clear on what you actually want:

• Do you want to step away fully or keep a hand in?
• Will you stay in the UK or split your time elsewhere?
• What income do you realistically need – not just to “cover costs,” but to live well?
• What role, if any, will family play in the business or your wealth plans?
• How will your week look without the business at the centre?

From working with business owners over the years, we’ve found that many assume they’ll sell up completely and step away. But through proper planning, they often realise what they actually want is a phased exit, perhaps keeping a minority stake. That clarity can significantly change the structure of the deal, tax position, and income strategy – though individual outcomes vary based on business type, market conditions, and personal circumstances.

This stage isn’t fluffy. It determines the shape and timing of the exit, and everything downstream.

For more on what this transition actually feels like, this article explores the human side of life after retirement.

2. Build your exit strategy early

Unlike employees, business owners can control their timing – but only if they plan far enough ahead. The most effective retirements are usually built five to ten years before exit, not in the year you put the business on the market.

Key considerations:

• Full vs partial exit – A full sale gives clean separation but may trigger higher tax in one go; a partial exit or phased sale can smooth income and reduce risk.
• Business Asset Disposal Relief (BADR) – Make sure you meet the qualifying conditions well in advance. Missteps with share structures, employment status or ownership timelines can cost thousands.
• Sale readiness – Positioning the business for sale – strong management team, clean accounts, recurring revenue – doesn’t just maximise valuation; it creates options.
• Family succession – If handing over to children, start legal, tax and role transitions early. Waiting until the last minute almost always causes friction.
• Third-party sales – If selling externally, timing matters. Market conditions, sector multiples and your personal readiness should align.

We’ve found that when business owners begin exit planning years in advance – restructuring ownership, developing leadership teams, and pre-qualifying for BADR – they can achieve better valuations with maximum relief and more efficient reinvestment structures. The value created through early planning can be substantial, though individual outcomes vary significantly based on business type, market conditions, and planning timeline.

3. Extract profits strategically before the sale

Too many owners treat profit extraction as an afterthought – but how you take money out of your business in the final years can have a bigger impact on your retirement than the sale itself.

Key areas to get right well in advance:

• Pension contributions (employer) – Company-funded pension contributions remain one of the most tax-efficient ways to extract profits. Used strategically in the years leading up to a sale, they can reduce Corporation Tax, boost personal retirement assets, and create a separate income stream independent of sale proceeds.
• Dividends vs salary – Reviewing your remuneration structure 3–5 years pre-exit can optimise both income tax and NI efficiency. Many owners run on autopilot here, missing opportunities to align extraction with their retirement timeline.
• Retained profits strategy – Decide deliberately how much cash to retain vs extract. Retained profits may increase valuation, but excess cash can sometimes reduce Business Asset Disposal Relief eligibility. Planning the right level ahead of time avoids nasty surprises at sale.
• Reorganising ownership structures – Introducing holding companies, family investment companies, or Employee Ownership Trusts (EOTs) at the right stage can open up different tax and succession options. The wrong timing can close them.
• Avoiding last-minute scrambles – Trying to restructure or bulk-extract profits in the 12 months before a sale is where most tax efficiency is lost. HMRC looks closely at pre-sale transactions – deliberate, early planning is key.

We’ve seen situations where business owners who begin strategic pension funding years before a sale build substantial retirement assets alongside sale proceeds, reducing reliance on the deal price. The tax savings alone can be significant, though individual outcomes vary based on business profitability, contribution levels, and personal circumstances.

4. Structure the sale proceeds wisely

The sale is often treated like a finish line – but in reality, it’s the starting point of your next financial chapter. How you structure, receive and reinvest the proceeds determines how effectively that value funds your lifestyle.

Considerations include:

• Lump sum vs staged or deferred consideration
  Many deals involve instalments, earn-outs or loan notes. Understanding the timing of cashflow and the tax treatment of each component upfront is crucial for building a stable post-sale income strategy.
• Use of wrappers post-sale
  • ISAs for tax-free flexibility.
  • Pensions (using annual allowances and carry forward) for longer-term income and estate planning.
  • Taxable portfolios for liquidity and capital gains planning.
  • Family investment companies or holding structures for more complex estates.
• Capital Gains Tax allowances and BADR
  Plan the timing of disposals to maximise reliefs. BADR can significantly reduce the CGT bill on qualifying gains, but post-sale asset structuring also matters for ongoing tax efficiency.
• Keeping cash vs reinvesting
  Post-sale, many owners keep too much in cash out of fear, or throw everything into one investment. A deliberate liquidity, defensive and growth allocation gives you income flexibility and inflation protection.

We’ve seen examples where business owners receive sale proceeds in stages – part upfront, part deferred. By using ISAs and pension allowances strategically in the early years, alongside structures like family investment companies, they can build diversified, tax-efficient portfolios that support both lifestyle and legacy goals – though individual outcomes vary based on deal structure, tax position, and personal circumstances.

5. Build your post-sale income strategy

Selling the business is only half the story. Next comes turning capital into a sustainable, tax-efficient income stream that funds your lifestyle for decades.

Key elements of a strong post-sale plan:

• Separate liquidity, income, and growth capital – Keep 12–24 months of core spending in accessible cash and short-dated assets. Build an income sleeve designed to match spending sustainably. Let the growth capital compound for the long term.
• ISA and pension sequencing – Just like City professionals, sequencing matters. Using ISA income first can keep taxable income lower, preserving allowances. Pensions can often be deferred to grow tax-free and used strategically later.
• Investment company or trust structures – For larger estates, setting up a family investment company or trust structure can provide control, flexibility, and succession advantages. This often replaces the business as the “central asset” of the family’s wealth.
• Income tax management – Blending different income sources (ISA, pension, dividends from investment companies, interest) allows control of adjusted net income – crucial for managing personal allowance tapering and higher-rate thresholds over time. 

6. Build in flexibility, family, and legacy planning

Selling a business isn’t just a financial event – it’s the start of a new chapter, often with more moving parts than expected. Tax rules shift, markets move, families evolve, and the business that once anchored everything is no longer there. A flexible plan keeps you in control as life changes.

• Liquidity and spending flexibility – Keep a deliberate liquidity buffer and defensive assets to ride out market shocks and changing personal priorities. Retirement spending often follows the “go-go, slow-go, no-go” pattern – higher in the first decade, flatter later, and healthcare-heavy in later years. Build this into the structure upfront so you can adjust smoothly without panic moves.
• Family dynamics and gifting – Wealth created through a business often enters family succession planning earlier than other types of wealth. Setting up trusts or family investment companies can help retain control while passing value down tax-efficiently. Regular gifts out of income, Potentially Exempt Transfers (PETs), or planned share transfers can all form part of a structured strategy.
• Inheritance Tax and succession – For many owners, the sale of the business creates a potential IHT issue where Business Relief no longer applies. Structuring assets intelligently post-sale – including pension preservation, gifting strategies, and use of trusts – helps reduce exposure while keeping options open. If you’re passing a business to children rather than selling, early succession planning is essential to avoid shareholding, role, and tax complications later.
• Estate documents and decision-making – Post-sale is the perfect time to review or create Wills, Letters of Wishes, and Lasting Powers of Attorney. Many owners also clean up shareholder agreements or unwind personal guarantees at this stage to reduce future friction.
• Philanthropy and legacy – For some, the sale is a chance to structure philanthropy in a way that reflects their values – donor-advised funds, charitable trusts, or structured Gift Aid strategies can align impact, control and tax efficiency.

A strong legacy plan isn’t about complexity for its own sake. It’s about aligning how you want to live, who you want to support, and what you want to leave – and building the financial structures to make that happen cleanly.

Porta’s Take

Retirement planning for business owners is different. Your business is usually the biggest asset, and the way you plan your exit, profit extraction, and post-sale income will define your financial freedom for decades.

By starting early, aligning your lifestyle goals with your exit strategy, using tax reliefs intelligently, and structuring sale proceeds deliberately, you give yourself clarity and control over both your finances and your future.

This isn’t about rushing the sale. It’s about building the retirement you actually want – and using the unique levers available to you as a business owner to make it happen.

You can also explore how other business owners experienced this transition – the emotional shifts, the surprises, and what “retirement” really meant in practice in this article.

Important information:

This article provides general information only and does not constitute personal financial advice. The information is based on our understanding of current regulations, which may change in future. Decisions about your finances should always be made based on your individual circumstances. If you’re unsure about the suitability of any course of action, you should seek regulated financial advice.The Financial Conduct Authority does not regulate tax planning, estate planning or trusts. The value of your investments can go down as well as up, so you could get back less than you invested.

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