Employee Ownership Trusts (EOTs) have become one of the UK’s fastest-growing business succession models.

In July 2025, the Employee Ownership Association (EOA) and the White Rose Employee Ownership Centre (WREOC) reported the creation of nearly 2,500 EOTs since their introduction in 2014 and 560 transitions in 2024 alone.

However, with the recent Autumn Budget announcing that Capital Gains Tax (CGT) now applies to EOTs, companies may question whether this once tax-efficient strategy is still worth it.

What is an Employee Ownership Trust?

An EOT is when a trust acquires a controlling interest (more than 50 per cent) of a company on behalf of its employees.

EOTs can allow employees to collectively benefit from the success of the business while owners reduce their involvement over time.

To qualify for EOT reliefs, the company must be a trading business or a holding company of a trading group.
Business owners may retain a minority shareholding or continue as directors, provided they do not control the trust.

Are EOTs still beneficial post-Budget?

In this year’s Autumn Budget, Rachel Reeves announced that CGT relief on disposals to EOTs will now stand at 50 per cent – half of the previous 100 per cent relief.

HMRC reported that the cost of CGT relief has increased significantly over the years, reaching £600 million in 2021/22.

With forecasts suggesting it could rise to more than 20 times the original cost, to £2 billion by 2028–29, the Chancellor decided to act.

Despite these changes, EOTs can still offer significant tax advantages, including tax-free bonuses of up to £3,600 per employee each year.

Employee ownership can also improve incentivisation and retention due to increased involvement in the company.

Selling to an EOT can also avoid the uncertainty of third-party buyers and allow founders to protect the business’s identity and company culture.

Other recent changes to EOTs?

EOTs have faced several changes in this year’s Budget and 2024’s Autumn Budget.

These include rules around UK residency for trustees and the qualifying conditions for CGT relief being extended from two to four years.  In addition, there is a new onus on trustees to ensure that consideration paid for shares by the EOT does not exceed the market value. This means that the trustees ought to take independent advice on valuation.

Planning early for exit

“Business owners who plan up to five years ahead and invest the time in ensuring their businesses are well prepared for sale with a strong, skilled management team and formal and efficient systems, will achieve the best value for their business and a smoother transition when it comes to exiting, whether that is through an EOT or another route.” Commented Hollie Edwards-Davies, Harbourside Corporate Finance.

For business owners considering an exit in the coming years, seeking support early will be essential in helping you to plan which route is right for you and your business and ensuring you maximise its value.

For expert financial advice and support in relation to EOTs, contact our team.