Budget 2025: EOT CGT Relief Cut for Sellers — But a Welcome Boost for Trustees

Posted: December 1, 2025

The Autumn Budget 2025 introduced a major change to the tax treatment of disposals of shares to Employee Ownership Trusts (EOTs).

While headlines focused on the reduction of tax relief for business owners, an important point is that the change actually improves the tax position for EOT trustees.

Here’s what has changed — and what it means for sellers, trustees, and employee-owned companies.

What the Budget announced

From 26 November 2025, the Capital Gains Tax (CGT) relief on qualifying disposals of shares to EOTs is being reduced:

• Previously: 100% of the gain on disposal was free from CGT for the selling shareholders.
• Now: Only 50% of the gain will qualify for relief; the remaining 50% is charged to CGT in the seller’s hands.

On the surface, this reduces the tax incentive for owners selling their company to an EOT. But the story does not end there.

Whilst selling shareholders have a higher cost, trustees are now in a better tax position

Under the old regime:

• The seller paid no CGT,
• But the EOT trustees inherited the seller’s original base cost.
• When trustees eventually sold shares (or triggered a deemed disposal), they paid CGT on 100% of the economic gain.

Under the new regime:

• The seller pays CGT on 50% of the gain immediately.
• The “tax-paid” portion is added to the trustees’ base cost.
• Trustees will eventually pay CGT only on the remaining 50% of the gain.

In effect:

The cost to selling shareholders is increased by an initial CGT liability on 50% of the gain and a future tax liability that previously sat 100% with the trustees now sits only 50% with them.

This strengthens the long-term tax position of employee owners and the trust.

Why this matters for employee-owned businesses

The change creates a redistribution of tax burdens:

1. The seller pays earlier — the trust pays less later:
Sellers face a new cash tax cost on half of the gain. But employees, via the trust, inherit a business whose eventual disposal comes with half the historical gain neutralised.
2. Trustees now benefit from a “stepped-up” base cost
This makes the EOT model more sustainable because the trust’s future CGT exposure is materially lower — improving long-term financial resilience.
3. Employee beneficiaries may see more value in the long run:
Less trust-level tax means greater ability to reinvest, distribute bonuses, or support the business.
4. EOTs become more attractive for long-term ownership models
Although the Budget reduces the initial incentive for sellers, the ongoing benefit to the trust and employees is enhanced.

Who gains and who loses

Losers:
• Selling shareholders — who now face a CGT bill on half the gain.
• Companies planning imminent EOT transitions — due to reduced upfront tax relief.

Winners:
• EOT trustees — whose eventual CGT charge is halved.
• Employee beneficiaries — who inherit a structure with lower embedded tax liabilities.
• Long-term EOT companies — which now get a stronger tax foundation for future ownership.

In short:

The Budget narrows the seller benefit but boosts the long-term advantage for employee ownership.

What should business owners and trustees do now?

RJP LLP can support clients in reassessing the impact of this structural shift.

For company shareholders owners planning a share sale:
• Re-run net proceeds calculations under the new rules.
• Review whether to accelerate or defer any planned sale.
• Consider alternative exit structures if the revised relief materially affects return expectations.

Conclusion — a rebalanced EOT system

The 2025 Budget changes shift the tax balance:
• Sellers now share the tax burden.
• Trustees — and therefore employees — face lower future CGT liabilities.

The EOT remains a viable, powerful succession mechanism, but with a different distribution of tax advantages: fewer short-term incentives for sellers, but stronger long-term benefits for employee ownership.

If you would like RJP LLP to review your EOT plans or help you evaluate alternative exit routes, our team is ready to guide you.
Phone RJP on 020 8339 1930 or email us on partners@rjp.co.uk