Recent changes to Employee Ownership Trust (EOT) business sales

According to the Employee Ownership Association, EOT sales rose to 2,470 in July 2025, up from 1,300 in 2022.

The appeal of EOTs includes:

• A simpler, confidential deal process
• continuity of leadership
• preservation of culture
• employee engagement and participation, and
• favourable tax treatment for exiting owners

The Budget changes to EOTs

The UK’s Autumn Budget in November 2025 announced reduced CGT relief on qualifying disposals to EOTs – down from 100% to 50% with immediate effect. For deals already in progress, the impact was immediate and significant in terms of the financial impact.

What this means in practice for EOTs

EOT sales continue to benefit from substantial tax relief, with a 50% discount in Capital Gains Tax (CGT). Sellers in a traditional sale pay up to 24% in CGT, whereas EOTs have an effective 12% CGT rate, therefore EOTs can deliver more value to owners.

Although the overall 12% tax rate for sales to EOTs remains below all other routes for sale, this change means that future deals will need more planning to factor in the need to fund CGT costs. CGT at 12% will be due on the total immediate and deferred proceeds, even though payment could be spread over up to 10 years.  This cash flow impact can be mitigated by applying to HMRC to pay the CGT due in instalments where cash is received after the tax is due.  If the deferred proceeds were not paid in full, but tax had been paid on them, this tax could be reclaimed.
 
In addition, there have been recent changes to restrict inheritance tax relief on company shares, meaning that succession plans should be reviewed.

To address these challenges, business owners need to conduct more frequent reviews of company structures, tax positions and future plans. The rules around EOTs may change in the future, but the need for a clear strategy remains as strong as ever.

Given the recent changes, EOT transactions may require:

• a clearer rationale for choosing the employee ownership path, and
• a more realistic and sustainable approach to valuation, governance and funding

What remains unchanged for EOT sales:

• Significant savings in CGT are still available, however this is now at a 50%, rather than the previous 100%, reduction. EOTs remain a viable and legislatively supported ownership model.
• The core non-tax benefits - continuity, culture and employee alignment - are unaffected.
• For some owners, EOTs will still represent the right outcome; for others, alternative routes may now be more appropriate.

The future of EOTs

Business owners will need to start thinking about succession earlier, rather than treating an EOT as a late-stage or last-minute solution. Owners will need to be very clear about what they want to achieve - whether that’s continuity, employee engagement, legacy, or a phased exit - before deciding if an EOT is the right route.

For owners who are well prepared and aligned with the employee-ownership model, EOTs can still work well.

Funding an EOT Sale

Despite the current unsteady nature of the lending market, plenty of lenders remain keen to put their money to work in an EOT transaction. Transactions which include lenders are taking a little longer, but our key message is that for owners of strong businesses who are looking to sell into an EOT, there remain plenty of options to explore. We would be delighted to assist you or your clients in finding suitable funding for an EOT transaction.

Planning to succeed with EOTs

The Budget marks a shift, rather than a shutdown, of the EOT regime and still offer an attractive tax rate compared to alternative exit options. In the future, EOTs are likely to be used more selectively - but where adopted, with greater clarity and intent.

Against a changing tax and ownership landscape, taking time to reassess succession plans is now more important than ever. For business owners who are considering an EOT option for the future, seeking expert advice to compare the full landscape of exit options would be particularly helpful. 

Here to help

As experts in the field of delivering EOT transactions, we can help you to successfully navigate the many facets of implementing an EOT for your business, as well as exploring the full landscape of business exit options.

Find out more about Employee Ownership Trusts and download our free guide to Employee Ownership Trusts.

If you would like to know more about EOTs or how we can help, please get in touch: