Your own pension and tax as you exit
How the money gets from the firm to you, and then to your family, as the rules stand in October 2026. A description of the rules for your own adviser to apply.
How the money gets from the firm to you, and then to your family, as the rules stand in October 2026. A description of the rules for your own adviser to apply.
Your own retirement includes a business to turn into money, and decisions about how that money reaches you and your family. This guide describes the main rules as they stand in October 2026. It is not advice. Ask your accountant and another financial planner to apply it to your circumstances.
If your firm is a limited company, money reaches you in three main ways while it trades: salary, dividends and employer pension contributions. Each is taxed differently.
is deductible for the company and taxed on you as income, with National Insurance on both sides.
are paid from profits that have already borne corporation tax, and are taxed on you at dividend rates.
are normally deductible for the company, are not taxed on you when paid, and grow inside the pension. They count towards your annual allowance.
In the years before an exit, the balance between the three affects how much you have, where it sits, and how it will be taxed later. Review it each year with your accountant.
The standard annual allowance is £60,000. Unused allowance from the three previous tax years can usually be carried forward, if you were a member of a registered pension scheme in those years. For people with high incomes, the allowance is tapered down. Once you have flexibly accessed a defined contribution pension, a much lower money purchase annual allowance applies to further contributions.
Two points follow for a principal. Large contributions in the final years before an exit may be possible using carry forward, if the company can afford them and the contribution is justified as a business expense. And taking money from your own pension flexibly before you have finished making contributions can limit what you can contribute afterwards. Plan the order.
How the sale proceeds are taxed depends on what is sold and by whom.
If you sell your shares in the company, the gain is yours and capital gains tax applies. Business asset disposal relief may reduce the rate on qualifying gains, subject to a lifetime limit of £1 million of gains. The rate of the relief went up on 6 April 2025 and again on 6 April 2026. The conditions include holding at least five per cent of the shares and votes, being an officer or employee, and the company being a trading company, all for at least two years before the sale.
If the company sells its business or assets, the company pays corporation tax on its gain. You then take the money out of the company, as dividends, salary, pension contributions or on winding the company up. Each route is taxed differently, and the relief may or may not apply to a distribution on winding up depending on the circumstances.
Where part of the price is deferred, ask how and when that part is taxed. The answer depends on whether the deferred amount is fixed or depends on future events, and it can mean tax is due before the money arrives.
Shares in an unquoted trading company can qualify for business relief from inheritance tax while you hold them. From 6 April 2026, full relief applies up to an allowance, with relief at a lower rate on value above it. Your accountant can tell you how that applies to your shareholding.
When you sell, the shares become cash or other assets. Cash does not qualify for business relief. A firm that was largely outside your estate for inheritance tax while you owned it can therefore add its full value to your estate on the day you sell. Do the estate planning alongside the exit, and consider the timing.
From 6 April 2027, most unused pension funds and death benefits are due to be included in the estate for inheritance tax. The nil-rate band of £325,000 and the residence nil-rate band of £175,000 continue to apply, and assets left to a spouse or civil partner remain exempt. Death-in-service benefits from registered schemes are outside the change. The residence nil-rate band is reduced for estates above a set value, and including the pension in the estate can bring an estate above that value.
Income tax continues to apply to inherited pensions where the member dies after 75, so the same fund can carry both taxes.
For a principal, the change affects two decisions. The first is whether to keep making large pension contributions before the exit. The second is the order in which to draw on pension, sale proceeds and other savings after it. Both answers depend on your age, the size of each pot, your spending needs and who you want to leave money to.
The date of the exit can matter for tax. Income and gains are taxed by tax year, running from 6 April to 5 April. An exit just before or just after 6 April can change which year's allowances and rates apply to the proceeds, and which year's income they are added to. Ask your accountant to model both sides of the date before you agree it.
Under Securo the exit date is yours to choose, and the structure is agreed firm by firm. That allows the timing to be set with your tax planning in mind.
Work out the income you need after the exit, and where it will come from in each year: pension withdrawals, the sale proceeds, any continuing earnings, the State Pension when it starts, and other savings. Each source is taxed differently, and drawing from them in a planned order can reduce the total tax paid over your retirement.
If you plan to keep advising part time for a period, that income will be taxed alongside anything you draw from the pension in the same year. Plan withdrawals around it.
An exit changes what you own. Check that your will reflects it, that pension nominations and expression of wishes forms are current, and that any lasting powers of attorney cover your financial affairs as they will be after the sale. If there is a shareholders' agreement, check what it says about your shares on death and on retirement.
Where your spouse or civil partner owns shares in the firm, works in it, or will share in the proceeds, include them in the planning. Each of you has your own allowances and reliefs, including your own lifetime limit for business asset disposal relief if each of you meets the conditions. The conditions have to be met for at least two years before the sale, so changes to who owns what need to be made well ahead of it, and on advice.
Gifts between spouses and civil partners who are married or in a civil partnership and living together are generally free of capital gains tax and inheritance tax. That can allow assets to be arranged between you so that each person's allowances are used. Your accountant needs to check the detail, including the rules that stop some arrangements from working.
Keep a record of the advice you receive and the decisions you make, in the way you would for a client. Note the date of each decision, the figures it was based on, and the reasons. Keep copies of the sale agreement, the payment schedule, the tax computations and the pension statements in one place. Your family or executors may need them, and so may HMRC.
Knowing the rules is different from advising a client who is emotionally involved in the outcome, and in your own exit you are that client. A planner and an accountant who are not part of the firm will ask questions you might not ask yourself, and will document the reasoning in the way you would for a client.
Securo does not provide tax or financial advice to you as the principal. It moves the running of the firm to Equity & General so that you have the time to plan, and it lets you set the date of the exit around that planning.
Fifteen questions about your clients, the transaction and the buying firm.
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The order in which to bring client files up to date in the eighteen months before a sale.
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When a business changes hands, employment law can move your staff to the new owner on their existing terms. How it works, and what you have to do.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.