As there many Pro-level shedists on here it’s probably the place to ask this:

Shed has been painted with Timbercare type products annually for about 5 years. The wood is in very good condition. We now want to paint it in a light colour exterior paint.
What’s the proper way to prepare the wood? I’m sure that if I go over the Timbercare, without trying to remove it, it’ll just bleed through the paint.
Water blast it off?
Hose pipe and a stiff brush?
Sanding?

Hose pipe and a stiff brush anyway as it is best to start with something clean.

Not sure what will stick / peel but I would suggest some kind of undercoat rather than just a tope coat if you are going to paint it.

Have you considered the coloured timber stain products as an easy alternative?

Here is a light purple woodstain as an example

Look at Treatex classic colour. It’s like cuprinol garden shades but oil based. Very good stuff but you’ll need two coats,the other downside is the small tin size but it’s still worth it.

Cuprinol/Johnsons ‘colours’ work very well TBH. You may need a couple of coats. We changed our fence at our caravan from autumn gold wood stain, to cream Johnsons’s colours – took two coats, but looks great. Our ‘summer house’ is pale blue and cream at home.