Tax Tips to Maximise Profit from Selling Your Construction Business
- Jones Financial Accounts
- Nov 14
- 3 min read
After years of building your construction or engineering business, there may come a point where you decide to step back, sell up, or hand over the reins. Whether you’re planning a full exit, transferring ownership to family, or bringing in new investors, the reality is this:
👉 The way you plan (and time) your succession will determine how much of your sale proceeds you keep, and how much goes to HMRC.
The truth is, many SME owners wait too long to think about tax efficiency. And by that point, major opportunities, like Business Asset Disposal Relief or strategic share restructuring, could already be lost.
In this guide, we’ll outline the key tax concepts, timing factors, and strategic steps you need to understand and implement to get the most cash back from your business sale, legally, efficiently, and strategically.
1. Why Succession Tax Planning Matters (And Why SMEs Miss It)
Why It’s Important
Succession isn't just about finding a buyer, it’s about structuring the deal to minimise tax leakage and maximise your after-tax proceeds.
For limited company directors, the difference between taking advantage of tax reliefs or ignoring them could be hundreds of thousands of pounds.
Common Reasons Business Owners Miss Out
They think tax planning starts after the deal is agreed
They assume “the accountant will sort it out”
They believe reliefs only apply to big corporations
They haven’t reviewed shareholding or asset structures in years
Look at it this way: the earlier you start, the more options you have — from splitting shares with a spouse to extracting assets before sale.
Key Tax Reliefs to Understand Before Selling
Business Asset Disposal Relief (Formerly Entrepreneurs’ Relief)
What It Is
A relief that reduces Capital Gains Tax (CGT) to 10% on qualifying business disposals, up to a lifetime limit of £1 million.
What You Need to Review
You must have owned the shares for at least 2 years
You must be an employee or director of the business
You must hold at least 5% of the shares and voting rights
Strategy
Review current shareholding, restructure if needed
Consider bringing a spouse into ownership early
Document your role as a director (if informal)
Real Example
A Midlands mechanical engineering business sold for £2.8m. Because the director had planned share restructuring 3 years earlier, he and his spouse both qualified for relief, saving £360,000 in tax.
Investors’ Relief
What It Is
A CGT reduction for external investors who hold shares for 3+ years, useful for MBOs or part-exits.
It allows for 10% CGT up to £10m (separate to BADR).
Strategy
If you're planning a management buyout or seeking growth capital before exit, consider bringing in external investors under this scheme.
3. Timing Is Everything: Why You Need 2–5 Years to Get This Right
Why It’s Important
You can’t retroactively qualify for many reliefs, especially those that require 2+ years of ownership or directorship.
Starting early gives you time to:
Prepare accurate and attractive financial statements
Restructure shares to include spouses, children, or holding companies
Extract surplus cash/assets tax-efficiently before sale
Real-World Results
A lift installation firm waited until 6 months before exit to restructure. They missed the 2-year BADR holding deadline and paid an extra £140,000 in CGT. A similar firm who planned 3 years ahead paid only 10% CGT, saving £270,000.
Strategy
Draft a 2–3 year pre-exit roadmap with a strategic FD/advisor
Reconcile director loan accounts to avoid surprise taxation
Extract excess cash early using dividends or pension contributions
4. Extracting Assets Tax Efficiently Before You Sell
Why It’s Important
Most construction firms own vehicles, equipment, cash reserves, or property. If you sell the entire entity with all assets inside, you often pay more tax than necessary.
What You Need to Review
Can the commercial property be transferred to a personal pension (SIPP/SSAS)?
Should surplus cash be extracted via dividends before sale?
Would creating a holding company reduce your tax bill?
Strategy
Move property into a pension 2–3 years before exit
Use pension annual allowances (£60k per year) to extract value tax-free
Create a holding company if asset separation is required
Key Takeaways
Exit tax planning takes time, 2 to 5 years for best results
Business Asset Disposal Relief can cut your tax rate to 10%
Structure ownership, cash extraction, and share planning in advance
Small changes now can save hundreds of thousands at exit
If succession or exit is anywhere on your horizon, even “one day” the best time to start planning tax strategy is now.
At JFA, we help construction and engineering SMEs design fully integrated succession roadmaps, including financial restructuring, tax planning, and management transitions.
👉 Download our free Exit Ready Financial Blueprint here: https://www.jonesfa.co.uk/resources
👉 Or book a strategy session to explore your exit options today.
Wrapping up today's insights, tomorrow we simplify another accounting challenge.
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