For founders, business owners and investors with an eye on the future, 2025 presents a timely opportunity to critically evaluate how their wealth is structured. Whether considering a business sale, planning a future venture, or thinking long-term about protecting capital and succession planning - ensuring their structure supports capital growth, tax efficiency, and flexibility in future investment or exit scenarios can unlock tangible long-term benefits.
Upcoming changes to Business Property Relief for Inheritance Tax (BPR) in April 2026 are an added incentive to act sooner rather than later.
A case in point
Take an entrepreneur who has built a successful business through a single UK company (the Target), owning 100% of the shares. When a private equity house approached with a management buyout offer, the founder agreed to cash out some proceeds and roll the rest into equity in the buyside structure.
However, being entrepreneurial, they weren’t done yet. They saw future ventures on the horizon and wanted a structure that would facilitate reinvestment, protect value and plan for the longer term. The solution? A personal holding company (PHC). While this planning is geared at UK resident entrepreneurs, the PHC could be incorporated offshore in order to confer beneficial ownership privacy.
How it works
The entrepreneur's share in the Target is transferred to the PHC in advance of the sale process, and then the PHC takes part in the transaction rather than the individual. If structured correctly, this reorganisation can qualify for capital gains tax share exchange relief on the transfer of the Target to the PHC, and the PHC receives a market value uplift - crucially resetting the base cost of the Target shares ahead of an onward disposal of its shares in the Target.
The consideration for the transfer can take the form of shares or loan notes issued by the PHC to the entrepreneur personally. Shares can cause long-term liquidity challenges as it is tricky to extract value, while loan notes can provide the flexibility for capital to be extracted more easily in the future and taxed under CGT rules (rather than income tax, which is the inevitable outcome for shares that realise value through dividends). This requires careful handling to avoid triggering unexpected tax charges, but when structured properly, this can be a powerful way to keep control and flexibility.
Where this structuring takes place more than 12 months before any disposal of the Target by the PHC, such disposal may qualify for Substantial Shareholdings Exemption (SSE) so no CGT is payable at all. However, as noted above, due to the uplifted base cost in the PHC's shares in the Target, the PHC structuring can be effected as a pre-transaction step immediately before the onward sale to the private equity house such that there is no gain realised on the PHC's shares in the Target.
Planning ahead
It’s vital to obtain HMRC clearance around share exchange relief and anti-avoidance rules – to do so, it will be necessary to demonstrate to HMRC that the transaction as a whole is being undertaken for commercial (not tax avoidance) reasons. But with proper advice, this type of structure can give founders and investors real advantages: control, privacy, optionality, and capital protection.
It is important to note that such planning can, however, have unintended consequences for tax-advantaged treatment of existing or contemplated statutory employee share plans. Therefore, it is always important to seek rounded tax advice which considers the viability of proposed structuring in the specific factual context of your business.
With careful planning, the use of a PHC in a corporate structure can support capital growth, tax efficiency, flexibility in future investment or exit scenarios and unlock tangible long-term benefits for founders, business owners and investors.