A Successful Business Sale: How We Helped Plan for Immediate Retirement

Our first article explores how we helped a client navigate a huge financial milestone of selling their business and transitioning into retirement.

What were the circumstances?

Our client had just sold their business and was due to receive a significant sum, but with this also came considerable complexity. The sale would deliver £6 million in total, which would be split into two payments – an immediate lump sum, with the remainder due 12 months later.

The sale of their business came with a substantial tax liability. The client faced a £1.5 million Capital Gains Tax (CGT) bill on the sale. Adding to the urgency, our client wanted to retire immediately, meaning we needed to address two critical challenges simultaneously: managing the tax burden and creating a reliable income stream for their retirement years.

How we Helped

Rather than simply investing the profits of the sale, we developed a plan that addressed each of the client’s financial priorities.

Managing the Tax Liability

Our first priority was securing the funds needed to cover the tax bill. We allocated £1.5 million into tax-efficient gilts chosen specifically for their minimal tax treatment when held to maturity. This ensured the client would have the exact amount needed when the tax bill was due, without eroding wealth through taxation.

Creating Immediate Income

To bridge the gap between retirement and the second payment landing 12 months later, we set aside enough cash to cover the client’s standard living expenses for the full year. This removed any pressure to withdraw from investments during this transition period and allowed us to focus the remainder on long-term growth.

In the process of addressing these immediate needs, we were able to identify additional planning opportunities.

Enterprise Investment Scheme (EIS): We invested £400,000 into the EIS, a government-backed scheme that offered three valuable benefits.

· CGT deferral

· Income tax relief on the investment itself

· Potential Inheritance Tax relief if the investment was held until death

Pension Contributions: We maximised our client’s annual pension contributions, allowing them to shelter additional income from taxation while building their retirement pot

ISA Contributions: We topped up ISAs for tax planning purposes

Gifting: We began making gifts to the client’s children. Beyond the personal benefit of helping the next generation, this reduced the size of the client’s estate, with positive implications for Inheritance Tax planning

Building Long-Term Growth

The remainder was invested across two professional investment managers, each managing globally diversified portfolios.

After the Second Payment

Once the second payment arrived 12 months later, we refined our planning further. Putting aside sufficient cash in a gilt ladder, a series of government bonds maturing annually, which would cover five years of living expenses.

Any cash remaining after this reserve was added to the existing diversified portfolio, and we continued to top up ISAs annually.

Ongoing Management

From year five onwards, the portfolio itself would generate the income needed moving forward. By this point, the combination of gilt interest, investment returns, and planning had transformed a tax liability into a comfortable, tax-efficient retirement income stream.

Throughout the process, we continuously reviewed affordability and adjusted planning as appropriate. As the client’s circumstances evolved, so did our recommendations, ensuring the plan remained aligned with their goals and priorities.

If you’re looking for financial planning but aren’t sure where to start, we’d love to help. We’re always available to discuss your circumstances and guide you toward the right solution. If you’re an existing client and would like to discuss the themes in this article or would be interested in sharing your experience for future pieces, please do get in touch.

Colmore Partners is an Appointed Representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority, the registration number is 223112.

This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.