EOTs post Budget: early signals, practical issues and further clarity

They say that a week is a long time in politics.  The same may not necessarily be true of tax policy, but as we’re coming up to a gargantuan two weeks since the Chancellor announced immediate changes to the tax treatment of company sales to an employee ownership trust (EOT), it feels timely to examine whether any clarity is emerging about the practical impact on those contemplating this route to ownership succession.

A reminder of the tax change

With effect from Budget Day (26 November 2025) all sales of a controlling interest to an EOT are now subject to an effective capital gains tax (CGT) rate of 12%. Prior to Budget Day the rate had been 0%.

For any other company sale, the rate is 24% although where Business Assets Disposal Relief (BADR) is available the rate is 14% on the first £1m of an individual’s gains (this will increase to 18% from 5 April 2026).

So if looked at only from a tax perspective, an EOT sale still provides the most favourable tax treatment compared to the alternatives.

A key practical issue – paying the tax

In our conversations with current clients who are contemplating an EOT sale, many are taking the view that as employee ownership represents their company’s best future, the tax change isn’t going to change their plans.

However there are some, particularly companies that have no or little immediate cash, who need to be confident they will have the funds available to pay the tax. A particular feature of many EOT sales is that the sale price is fixed on the sale date, with the purchase price then payable in instalments over subsequent years. A seller must (under the basic tax rules) pay their CGT on the full sale price by 31 January following the end of the tax year in which it becomes due. For example, for a sale completed in December 2025 the tax must be paid by 31 January 2027. So it’s important to be confident that a sufficient amount of the sale proceeds will have been received in time to pay the tax. Companies with good cash reserves may find this less of a concern.

A right to request CGT instalment payments of up to eight years

For those with less cash, one immediate way to achieve confidence in being able to pay the tax is to use a statutory right to request HMRC to allow instalment payments over up to eight years, available if the purchase price is payable over more than 18 months (it normally will be).  We feel this will be an important facility in some cases.  Any tax payments deferred in this way will, though, be subject to interest.

Getting clarity from government…

Beyond that, dialogue is currently taking place between the employee ownership association (eoa) and its various members (including us as members of its specialist adviser panel), to be followed by representations to the Treasury.

We believe the government needs employee ownership (it is one of the few things they have in their toolbox to improve productivity) and it is in their and everyone else’s interests to ensure that sales to EOTs continues to work at least as well as it has done since it was created in 2014 .

So watch this space…and we’ll keep you updated when there is more to report.