Autumn budget 2025: Changes to EOT tax relief but still a strong choice for business owners
In the much-anticipated autumn budget 2025, the Chancellor unexpectedly announced a change to the capital gains tax (CGT) relief on the sale of a company to an Employee Ownership Trust (EOT). With immediate effect (26th November 2025) the existing 0% potential rate will be replaced with 50% relief, so that now half of the gain on a qualifying EOT sale will be tax free.
This is a significant change but we think it’s important to look at it in the round.
First, focussing purely on the tax, the EOT tax relief continues to remain strong when compared to a third-party sale or other forms of value extraction. Below, we outline how the CGT position has changed over time and how EOTs still compare favourably.
CGT Rates: Third-party Sale vs EOT Sale
Prior to November 2024
- 3rd party sale would be 10% on first £1million and 20% on anything above.
- Sale to EOT 0%
The numbers below assume business assets disposal relief (BADR) continues to be available and reflect the changes to that relief since November 2024.
From April 2025
- 3rd party sale would be 14% on first £1million and 24% on anything above.
- Sale to EOT 0%
From 26th November 2025
- 3rd party sale continues to be 14% on first £1million and then 24% on anything above.
- Sale to EOT now 12% on all gains.
From April 2026
- 3rd party sale will become 18% on first £1million and 24% on anything above.
- Sale to EOT 12% on all gains.
The income tax free bonus up to £3,600 for employees continues.
Tax is only one part of the story
Second, tax will invariably be important when planning ownership succession but it’s important to be aware of the significant other advantages of a move to employee ownership, for example the potential for improved company performance due to more engaged and motivated employees. Evidence shows that employee owned businesses tend to experience higher productivity, stronger employee engagement, and enhanced long-term resilience. (See previous blog on the People Powered Growth Report Findings). It also enables a business to remain independent and employees to share in the wealth that they are helping to create, also creating a legacy for the founders. Overall, it will often be a more attractive exit route compared with any alternatives.
We therefore believe that EOTs continue to offer an attractive and compelling ownership succession route.
Cynical people may also conclude that with the Chancellor having tinkered with EOTs in the last two Budgets it is only a matter of time before further restrictions or tax increases are imposed and so look to complete their company sale sooner rather than later.
Government's explanation of changes to EOTs here.
If you’d like help understanding how these changes may affect you and your business or if you are considering an EOT please get in contact for a no obligation call with one of our expert solicitors.
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Enterprise Management Incentives (EMI): Significant and Positive Changes
In addition, the chancellor has also announced positive news for significant increases in the limits applying to Enterprise Management Incentives (EMI) options effective from April 2026;
- Employee limits increase from 250 to 500, full-time equivalent employees.
- The company gross assets test increases from £30 million to £120 million.
- The total limit on the value of EMI option shares (measured at the date of each grant) increases from £3million to £6 million.
- The maximum holding period will increase from 10 to 15 years applying to existing EMI contracts.
- Plus removal of the EMI notification requirement from April 2027.
These last two points will be legislated in the Finance Bill 2026-27.
We see this as a really positive move, significantly extending the availability of this simple and attractive form of long term reward to the kind of ambitious companies that can use it to attract and retain the quality key people essential to their growth.
If you’d like help understanding how these changes affect your business or are considering an EOT or EMI scheme, we would be delighted to support you, please get in touch for a no obligation call with one of our expert solicitors.