While selling a business can be financially rewarding, it can also present financial challenges. Your business is likely to be worth a significant amount of money, and determining how to invest the proceeds from a business sale – in order to set yourself up for the next stage of your life – is not always easy.
Recent changes to Capital Gains Tax (CGT) rates highlight the importance of incorporating tax efficiency into your business exit strategy. As of April 2025, the CGT rate under Business Asset Disposal Relief (BADR) increased from 10% to 14%, with a further rise to 18% scheduled for April 2026. BADR continues to apply to lifetime gains of up to £1 million. Gains above this threshold are subject to standard CGT rates, which for higher-rate taxpayers rose from 20% to 24% for disposals made on or after 30 October 2024. These changes could significantly affect the net proceeds from your sale, making early planning essential.
Here, we explore some strategies to consider when investing your money following the sale of a business. Whether you’re selling your business to retire, move on to a new venture, or diversify your wealth, here’s how you might go about investing your money for the future.
Start with your goals
When considering how to invest the proceeds from a business sale, the first step is always to determine your financial goals. Are you looking to grow your capital further? Or are you looking to generate an income stream from the money today?
When thinking about your goals, your age and lifestyle will be crucial factors. If you are in your 40s when you sell your business, you may be planning to continue working. In this case, generating long-term capital growth from your investments may be your main goal.
However, if you are in your 60s when you sell up, you may be approaching retirement. In this scenario, you may be looking to generate an income stream from your capital while simultaneously beginning to pass on wealth to future generations.
Of course, you could be somewhere in between these two scenarios. Pocketing a large amount of money from a business sale doesn’t necessarily mean you’ll be on track to achieve your dream retirement. How much you’ll need for retirement will depend largely on your lifestyle. So, you may be interested in generating a combination of growth and income from your capital.
Don’t forget to give yourself some flexibility when determining your goals. Going from running a company to retirement can be a difficult transition for some people and your plans may change. Think about how much of your business sale proceeds you want to invest. It’s wise to keep some capital available in order to cover short-term expenses, and for any unforeseen eventualities.
Assess your risk tolerance
At this stage of the process, you also need to think about your risk tolerance. Is capital preservation a top priority? Or are you comfortable taking on some risk in the pursuit of higher returns? Focusing on both your goals and risk tolerance will help you determine how to invest your money in the most meaningful way.
Develop a strategy to invest proceeds of your business sale
Once you have considered your goals and risk tolerance, you’ll be in a better position to develop a strategy to invest the proceeds of your business sale.
A robust strategy could incorporate a range of assets, including:
- Investments into companies via the equity markets. Equities have historically generated the highest returns for investors over the long term[1]. It is important, however, to consider a diversified portfolio of equity investments in order to lower company-specific risk.
- Fixed interest (bonds). Bonds can be lower-risk investments and could help preserve your capital. They are essentially debt – your money is loaned out to both governments and companies in return for interest payments.
- Commercial property. This form of property can help to diversify an investment portfolio. You can gain exposure to the asset class without having to physically own the underlying asset.
- Cash and cash equivalents. Cash savings offer low returns but are handy for liquidity purposes and provide optionality.
By using a combination of the aforementioned asset classes, a portfolio can be created that is aligned to your own attitude towards risk and your longer-term objectives.
The importance of tax efficiency in post-business sale investments
A good strategy for investing the proceeds of your business sale should consider tax as part of a broader financial planning approach. Tax is often a significant factor in personal wealth erosion, so making use of available tax-efficient investment wrappers can be beneficial.
For example, investing in a pension may offer certain tax advantages. Within a pension, investment returns are generally tax-free, and pension contributions can attract tax relief, which could reduce your Income Tax bill depending on your personal circumstances.
Currently, the standard annual pension contribution allowance for tax relief purposes is 100% of your salary or £60,000, whichever is lower. However, if you are looking to invest more than this, you may be able to take advantage of pension ‘carry forward’ rules. These allow you to make use of any annual pension allowance that you have not used in the last three years.
Stocks and Shares ISAs are another tax-efficient vehicle to invest the proceeds of your business sale. Like pensions, they allow your investments to grow free of tax. Currently, every adult in the UK has an annual ISA allowance of £20,000 meaning that a couple can invest £40,000 tax-free per year across two ISAs. Meanwhile, if you have children, you can also fund Junior ISAs on their behalf. Junior ISAs, which can receive up to £9,000 annually per child, offer similar tax advantages.
Using trusts for wealth transfer after a business sale
If you want to build generational wealth, then the use of various trust structures might be worth considering. In certain circumstances, trusts can enable individuals to pass assets on to future generations while retaining some degree of benefit, such as the ability to receive an income.
Unlike making outright gifts, some trust arrangements may allow the original owner to retain a level of control and access to income from the assets during their lifetime. This can appeal to those who wish to support their heirs while maintaining financial security.
Selling a business is a great opportunity to develop a long-term financial plan
Selling a business can represent a pivotal opportunity to develop a long-term financial plan. A structured, holistic approach can help align your newfound capital with your life goals and future aspirations.
A comprehensive plan may incorporate:
- Goal-based investing
- Tax-efficient strategies
- Retirement planning
- Estate planning considerations
- Asset protection
By building a personalised investment strategy that takes your risk tolerance, lifestyle preferences and family needs into account, you may be better positioned to preserve and grow your wealth over time.
How Bowmore can support you after a business sale
At Bowmore, we specialise in creating holistic financial plans for individuals and families. We have also been working with entrepreneurs and business owners for over three decades. As an independently owned business ourselves, we understand the challenges of privatising corporate wealth, and we can help you determine the best way to achieve success.
Want to find out more about how to invest the proceeds from a business sale and make the most of the money you have? Get in touch with us today.
Regulatory Information
- Bowmore Financial Planning and Bowmore Asset Management Ltd are authorised and regulated by the Financial Conduct Authority
- The Financial Conduct Authority does not regulate Estate Planning, Inheritance Tax Planning or cash flow planning.
- Bowmore Financial Planning and Bowmore Asset Management Ltd are not regulated to provide tax advice.
- The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.
- The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in future.
- A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
- The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.
[1] Equity investing for a new era: The return of alpha | BlackRock