Employee Ownership Trusts – What business owners need to know

1 July, 2026

With more than 2,400 businesses now operating through an Employee Ownership Trust (EOT) structure, this has become a mainstream option for business owners thinking about succession and exit.

The tax benefits that helped drive that growth have recently changed, but EOTs remain a competitive succession route. For many owners, the financial case was never the only consideration.

What is an Employee Ownership Trust?

An EOT is a structure through which a company becomes majority-owned by a trust on behalf of its employees.

The existing shareholders sell a controlling stake to the trust, which holds those shares for the collective benefit of the workforce.

Employees do not buy shares directly. Instead, they benefit through profit-sharing arrangements and a genuine stake in the long-term success of the business.

For the selling owner, it is a way to exit on their own terms while keeping the company’s culture and identity intact.

Capital Gains Tax (CGT) relief changes to EOTs

Until November 2025, qualifying owners could sell to an EOT and pay no Capital Gains Tax (CGT) on the gain, but that has now changed.

For disposals completing on or after 26 November 2025, 50 per cent of the gain is exempt from CGT, with the remaining 50 per cent taxed at the individual’s prevailing rate.

Business Asset Disposal Relief (BADR) and Investors’ Relief cannot be used alongside EOT relief to reduce the chargeable portion further.

For higher-rate taxpayers, the effective CGT rate on an EOT sale is around 12 per cent. This is still well below the 24 per cent that applies to most other business disposals.

The 2025 Budget also introduced a requirement for trustees to take all reasonable steps to ensure the price paid does not exceed market value, making a robust and defensible valuation more important than ever.

Why use an EOT as part of your exit strategy?

Tax efficiency is one factor, but it is rarely the only one. Many owners are drawn to EOTs because there is no external buyer imposing a new direction, no protracted trade sale negotiations and a genuine sense that the business and its people will be looked after.

Profit-sharing arrangements also tend to improve engagement, retention and productivity, which support the business through the transition and beyond.

Is an EOT right for your business?

EOTs tend to work best where there is a strong management team capable of running the business after the transition and a workforce with genuine engagement. They suit owners whose priorities go beyond maximising the headline sale price.

The process involves obtaining an HMRC-compliant valuation, preparing financial forecasts to show the business can meet deferred consideration over time and working with specialist advisers to structure the transaction correctly.

If you are exploring your exit options and want to understand whether an EOT could be the right fit, please get in touch with our team.