Employee Ownership Trusts (EOTs) Post Autumn Budget: Are They Still Worth It?

The Employee Ownership Trust (EOT) tax relief has been reduced but not removed, and so the EOT route will remain a suitable exit strategy for the right businesses.

The 2025 Autumn Budget delivered an unexpected shock for business owners considering a sale to an EOT. After the positive changes introduced in the previous Budget, there was no anticipation that the 100% Capital Gains Tax (CGT) relief would be reduced to 50% so soon. Unsurprisingly, this would’ve sparked concern amongst founders who are considering an EOT as their succession route.

However, while the relief has been reduced, it shouldn’t be ruled out as the EOT model continues to offer a compelling, tax-efficient, and culturally aligned exit option for the right businesses. Below, we explore what the change means in practice and why the EOT route is still worth considering.

 

What has changed?

Under the previous legislation, qualifying business owners selling a controlling interest to an EOT could benefit from a full exemption from CGT on the sale. From 26 November 2025, this exemption reduces to 50%.

This means sellers will now pay CGT on half of the gain, the remaining half remains fully exempt, and no changes have been made to the tax-free bonus rules for employees (up to £3,600 per year). While this represents a tightening of the regime, the relief is still significant compared with many alternative exit routes.

 

Why does an EOT still make sense?

A Seller Tax Position that Remains Highly Efficient

At 50%, the CGT relief is still generous. Business owners can still pay significantly less tax than they would in a normal business sale, spread the sale payments over time, often using future company profits and avoid the stress that comes with selling to an external buyer, such as long negotiations, warranties, or performance-based earn-outs. Because of this, many owners will still find the post-2025 Autumn Budget tax position more favourable than a third-party sale.

Protecting Legacy and Culture

For founders who want to protect staff, maintain local employment, and preserve the values and identity of the business, the EOT remains unmatched. The company continues operating as normal, with employees sharing in future financial success. For organisations with strong culture and long-standing teams, this will remain a major attraction.

A Simpler and Often More Certain Transaction

EOTs continue to offer an exit strategy with no need to find a buyer, no lengthy due diligence process, no requirement for personal warranties or indemnities, and a greater deal of certainty and clearer timelines. This ease of execution is often a major factor for owner-managers who want a clean and predictable succession plan.

Incentivised Workforce and Stronger Engagement

EOTs can lead to improved retention, higher productivity, a more engaged workforce, and a sense of shared purpose. These benefits are unchanged by the Autumn Budget.

Continued Government Support for EOTs

The fact that the relief remains, even in reduced form, is notable. If the Government wanted to withdraw support for the EOT model, they would’ve done so. A 50% relief still signals a commitment to EOTs as a viable succession model.

 

Who will be most affected?

The reduction will mainly impact owners with higher base-value businesses and those expecting to extract substantial tax-free gains. However, the commercial drivers, cultural motivations, and strategic advantages of EOTs remain unchanged, and in many cases, these outweigh the tax considerations.

For the right businesses, a sale to an EOT will continue to be a practical and appealing succession option.

The Budget may have delivered unexpected news, but it hasn’t removed the core advantages of the EOT structure.

For business owners who value certainty, cultural continuity, and a fair yet tax-efficient exit route, an EOT remains an excellent choice. The reduction in tax relief simply reinforces the importance of:

• Choosing experienced advisors.
• Setting an appropriate and defensible valuation.
• Properly modelling affordability and future cash flows.

At TC Group, we specialise in supporting businesses on their journey to employee ownership, and if you’d like support with reviewing whether an EOT remains the right fit for you and your business, or to explore alternative succession strategies, we’re here to guide you through opportunities and complexities with practical, tailored advice. 

To find out how we can support your business, speak to our EOT experts.