The EOT Relief Has Changed, But the Opportunity Hasn’t

The 2025 Autumn Budget reduced the Capital Gains Tax relief on Employee Ownership Trust (EOT) transactions from 100% to 50%. Understandably, this has raised questions for owners who were thinking about an EOT as part of their succession plans.

However, EOTs continue to provide a strong exit route for many businesses, not just because of tax, but because of the way they protect people, culture, and continuity in the medium to long term.

 

What the change actually means

As of November 2025, sellers will now pay tax on half (50%) of the chargeable gain, in essence relating to an effective rate of tax of 12%. Although this represents a reduction in relief, it still compares favourably with a conventional sale, such as a trade sale or management buyout, so many owners will continue to see clear advantages.

Importantly, the tax rules around employee bonuses remain unchanged, meaning EOT-owned businesses can continue to reward staff with income tax–free bonuses, up to the current annual cap of £3,600 per employee.

 

Why EOTs still work well for Qualifying Businesses

CONTROL OF THE PROCESS

No need to actively source a buyer, no sales negotiations, and fewer warranties. It’s often a smoother and more predictable transaction through to completion.

 A TRUSTED HOME FOR THE BUSINESS

Ownership stays within the organisation. Jobs, values, and the reputation business owners have built carry forward.

EMPLOYEE ENGAGEMENT

Sharing the future success of the business tends to support retention, motivation, and a more united team.

TAX STILL MATTERS

A 50% exemption remains a significant benefit. Sale proceeds can usually be paid over time from future profits, reducing pressure on cash. However, the changing rules require the timing of tax payable on the gain to be highlighted and planned for accordingly.

 

When are EOTs most attractive?

An EOT can be ideal for owner-managers who:

• Seek certainty and a clear succession plan in the medium to long term to pass value to their employees
• Value culture and continuity
• Are not keen on lengthy third-party negotiations

 

How can TC Group help?

The TC Corporate Finance and Tax teams support owners who are exploring employee ownership and other succession routes. If clients are weighing up whether an EOT still suits their business, or want to compare it with other options, we can help. Our team provides clear, practical advice to guide you through the process and ensure the approach is right for you. Get in touch today by filling in the form below.