Your company can change without you investing another penny

Consider a consultant who has spent twenty years building a successful private practice. Their plan is to reduce clinics during their fifties and retire in around ten years. The NHS pension is building towards retirement, and the practice company has accumulated investments alongside its clinical business.

They begin giving up sessions. They have more time outside work, and the company investments remain in place. Life is moving in the intended direction.

Yet the company’s tax position may need another look. As clinical activity reduces, investment activity can become more significant in the business overall. That can affect eligibility for Business Asset Disposal Relief when the consultant eventually exits.

Reducing work and retaining company investments can each be reasonable. The question is how those choices fit together as the practice changes.

The company can change without buying another investment

In this hypothetical example, the company holds an investment portfolio of around £800,000. Clinical receipts gradually fall from £400,000 a year to £160,000, while the investments remain broadly unchanged and continue producing income. The figures are invented, and the investment assumptions are a simplification, not a forecast.

Clinical receipts are turnover, before expenses and tax. The portfolio is company wealth, not £800,000 automatically available for family spending. Understanding how that wealth will reach the household is part of the retirement plan.

Why trading status matters

Business Asset Disposal Relief, or BADR, can reduce Capital Gains Tax on qualifying disposals. For ordinary company shares, eligibility generally includes trading-company status alongside ownership, employment or office-holder and qualifying-period conditions. Most such share disposals require the relevant conditions to have been met for two years.

For qualifying disposals from 6 April 2026, the BADR rate is 18%, subject to the available £1 million lifetime limit. Earlier claims use that limit. This is a shareholder relief; it is not an 18% tax rate on investment gains inside the company.

A company can have non-trading activities and still qualify. The question is whether those activities are substantial when the company’s activities are considered as a whole.

The 20% figure is not a guarantee

HMRC’s guidance on substantial non-trading activity considers income, the asset base, expenses, staff or management time and company history. These are indicators to weigh together, rather than independent tests with statutory percentage limits.

The guidance says that where neither non-trading income nor the asset base suggests a non-trading element above 20%, a case is unlikely to warrant more detailed review. That practical approach does not guarantee relief. Nor does one indicator crossing 20% automatically decide the answer.

For our consultant, a low number of hours spent managing the portfolio would not settle the assessment. Neither would one year’s income ratio. The company’s wider facts and history matter.

The purpose of retained assets matters too. HMRC distinguishes funds retained for trading purposes from a separate investment activity. Cash needed for operating costs or demonstrable business spending may require a different assessment from long-term investments held to support the shareholder’s eventual retirement.

The example’s figures are therefore a reason to investigate. They are not enough to conclude that the company has lost its trading status.

Test the retirement plan without assuming the relief

If retirement remains ten years away, it would be premature to let one possible future relief dictate the entire investment strategy. Tax rules, clinical activity and family needs may all change.

Ask the planner to show the retirement plan with and without the assumed relief, using tax assumptions agreed with the accountant. Would a less favourable outcome delay a reduction in work, change spending materially or leave the plan broadly affordable?

Retaining investments, extracting money over time, making pension contributions where appropriate or considering a different structure each has consequences. Compare company and shareholder taxes, charges, access and the personal proceeds available for the family’s plans. Moving or selling assets can itself create costs, and does not automatically resolve every eligibility question.

Timing also needs attention. Relief can remain available in certain circumstances when shares are sold within three years of the company ceasing to be a trading company. That date can precede the final clinic. A distant retirement date is not a reason to leave the status unchecked until the business closes.

Review the company and household together

The accountant brings the company’s accounts, liabilities and tax history, including why funds have been retained. The planner brings the household’s spending needs, NHS pension estimates, personal assets and intended working pattern. Specialist tax input may be needed on trading status or an eventual exit.

A useful review should establish what the company needs to support over the next few years. Which assets are required by the practice? Which are intended to replace earnings as clinics reduce? How much could each route eventually provide personally after tax?

Record the current assessment, the options considered and the changes that should prompt another review. These might include a material reduction in clinics, a change in investments or a clearer exit date. Agree who will bring the advisers back together.

The consultant’s original ambition may remain entirely achievable. Reviewing the company as the work changes helps establish what that ambition will cost, without making retirement depend on a relief whose availability has been assumed rather than assessed.

This article provides general information, not individual tax, legal, investment or pension advice. The scenario and figures are hypothetical. Relief and tax treatment depend on the facts. Rules were checked on 26 October 2026.