With recent changes to capital gains tax, many SME owners are reassessing their exit plans. Employee Ownership Trusts (EOTs) have been a popular route in recent years, offering attractive tax advantages alongside a way to preserve a business’s culture and independence. But with the tax landscape shifting, are EOTs still worth considering? For many business owners, the answer remains yes, but with the right planning and expectations.

Employee Ownership Trusts (EOTs) have been one of the most attractive exit routes for SME owners over the past decade, largely because they offered a rare outcome: the ability to sell your business and pay no capital gains tax. That position changed significantly following the 2025 Autumn Budget.

With effect from 26 November 2025, the government reduced the capital gains tax (CGT) relief available on qualifying sales to EOTs from 100% to 50%. In practical terms, this means that only half of the gain on a sale to an EOT is now exempt, with the remaining 50% subject to CGT (albeit still at a relatively favourable effective rate compared to other disposal routes).

This has prompted many business owners to revisit their exit strategy. If the “tax-free sale” headline has gone, is an EOT still worth considering?

The answer, in many cases, is yes -but for different reasons.

While the tax advantage has been reduced, it has not disappeared. EOTs still offer a more favourable tax outcome than a standard trade sale, particularly when compared with rising CGT rates in other contexts. But more importantly, the rationale for choosing an EOT has always gone beyond tax.

What distinguishes an EOT is the outcome it delivers for the business. A trade sale may generate the highest upfront value, but it often comes with a loss of control and uncertainty around the future of the company, whether that is integration into a larger group, changes to leadership, or a shift in culture.

By contrast, an EOT allows the business to remain independent, with ownership transferred to a trust for the benefit of employees. The existing management team typically continues to run the business, providing continuity for clients, staff and suppliers. For many founders, particularly those who have built their business over a number of years, that continuity and legacy are key drivers.

That said, the reduction in CGT relief does sharpen the commercial analysis. EOTs are not a universal solution and are best suited to businesses with strong, sustainable cash flow. This is because the purchase price is usually funded out of future profits, meaning that value is realised over time rather than upfront.

Valuation expectations also need to be managed more carefully in the current landscape. While EOTs are based on market value, they may not match the premium achievable through a competitive trade sale — and with the tax advantage reduced, that gap is more relevant than it once was.

Management strength is another critical factor. Ownership may sit with the trust, but performance still depends on the leadership team. A robust and capable management structure is essential to support the transition and long-term success of the business.

Ultimately, the 2025 changes have not removed EOTs from the table; they have reframed the decision. The question is no longer “Is this tax-free?” but “Is this the right long-term home for my business?”
For owners who value independence, employee engagement and continuity, EOTs remain a compelling exit route with the right planning and advice.