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Employee Ownership Trusts in 2026: Flexible Succession Planning with Tax Benefits
29 January 2026
Accounting & Compliance, Building a Business, People, Selling a Business
Since their introduction, Employee Ownership Trusts (EOTs) have helped hundreds of UK business owners plan succession while rewarding employees and maintaining business continuity.
The Autumn 2025 Budget has changed CGT relief on disposals into EOTs, but these trusts remain a flexible, tax-efficient, and strategic solution for owners looking to transition their business on their own terms.
Autumn 2025 Update: CGT Relief What Changed?
- With immediate effect, Capital Gains Tax (CGT) relief on disposals into an EOT has been halved, from 100% to 50%.
- 50% of the gain is now treated as chargeable, payable at the full CGT rate.
- Importantly, the chargeable portion cannot be offset against Business Asset Disposal Relief (BADR) or Investors’ Relief (IR).
While this reduces the immediate tax advantage, EOTs remain a highly effective succession planning mechanism, particularly when combined with careful structuring and long-term planning.
What Is an Employee Ownership Trust?
An EOT is a trust that owns a controlling stake (over 50%) in a company on behalf of its employees.
Rather than selling to a third party, owners can transfer shares in a structured, flexible, and tax-efficient way, while maintaining influence over strategic decisions and the pace of change.
With current CGT rates (2025/26), tax of sale proceeds are effectively taxed at a maximum of 12%.
Key points:
- Must be a trading company or trading group
- EOT holds more than 50% of the shares
- All employees benefit equally (limited tiering by pay or hours allowed)
Why Consider an EOT?
Avoid a Third-Party Sale
Transitioning ownership to an EOT removes the need to find an external buyer, while allowing owners to realise capital.
Flexible Transition
Day-to-day operations can continue as normal. Ownership and management changes can be staged gradually for a smooth handover.
Tax Advantages
CGT relief: Up to 50% exemption on eligible disposals (post-Autumn 2025 update)
Tax-free bonuses: Employees may receive up to £3,600 per year
Incentivise Key Staff
Combine EOTs with share option schemes to reward second-tier management, retain talent, and maintain continuity.
Partial Ownership Retention
Owners can keep a minority stake while the EOT holds the controlling 50%+ share.
Who Benefits from an EOT?
Business owners
Realise capital, reduce tax exposure, and plan succession aligned with personal values.
Employees
Gain a stake in the business, tax-free bonuses, and enhanced engagement.
The business
Maintains continuity, motivates staff, and supports long-term growth without disruptive third-party sales.
Practical Considerations
Setting up an EOT requires careful planning:
- Work with accountants, legal advisors, and trustees to ensure compliance and efficiency
- Consider the impact of share options on eligibility for EOT benefits
- Plan the timing of ownership transfer, capital payments, and management handover
- Ensure all legal and employment conditions are met
Why Employee Ownership Trusts Are Growing in Popularity
Since their introduction in the UK, EOTs have become a popular succession strategy across sectors, particularly people-focused businesses.
Their flexibility means they work for companies of varying sizes from SMEs to large enterprises.
Even with the Autumn 2025 CGT adjustment, EOTs remain a structured, flexible, and tax-efficient way to transition ownership, retain talent, and maintain business continuity.
How We Can Help
For business owners looking at the bigger picture and planning a successful exit, it’s important to assess all options and structure a plan that works for your business, your team, and your personal goals.
Our team are experienced in helping clients:
- Plan the succession of their business
- Evaluate all available options, including EOTs, third-party sales, management buyouts, and hybrid approaches
- Structure deals and work with legal advisors, trustees, and other stakeholders
- Plan phased transitions to ensure continuity and stability
- Navigate Capital Gains Tax (CGT) and Inheritance Tax (IHT) implications
Get in touch
If you’re considering succession planning and want to identify the best solution for your circumstances, we can provide expert guidance and practical advice to make it work for your business.
Call us on 01634 731390 to discuss your options.
Our services
If you would like to find out more about some of our services that might help you please take a look at our related pages:
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Take a look at our other blogs on the topic of business sales and exit strategy:
The 3 Biggest Problems SME Business Owners Face When Selling
5 Ways Real-Time Financial Data Can Help You Make Smarter Business Decisions
The content in this blog is correct as at 19th January 2026. See terms and conditions.
