Recent changes to Capital Gains Tax on Employee Ownership Trust (EOT) sales have prompted concern among business owners, however the reality is proving far less disruptive than first feared, according to expert Chris Maslin, founder of Go EO.
When the November 2025 Budget confirmed the capital gains tax exemption on qualifying EOT sales would be reduced, some questioned whether this would undermine employee ownership as a viable exit route.
Several months on, experience suggests otherwise, with EOTs continuing to attract founders who value long-term stewardship and the future of their business and staff once they have left ‘the room’.
“In most cases, founders look at the figures, acknowledge the difference and then carry on with the process,” said Chris.
“A 12 per cent rate is of course higher than 0%, yet for many it is acceptable, particularly when an EOT already aligns with their wider goals for the business.”
Under the revised rules, founders selling to an EOT typically face an effective CGT rate of around 12 per cent, rather than the zero rate previously associated with these transactions. While this represents a clear change, it remains low when compared with many alternative exit routes and with income tax rates.
“No one likes paying more tax, but most business owners selling to an EOT do it for holistic reasons, rather than looking for a ‘bigger’ price tag. They want the business to continue on, to continue to grow and to provide opportunities for their team in the future,” Chris said.
In practice, Go EO has seen very few deals fall away purely because of the tax change. More significant than the tax rate itself is the timing of Capital Gains Tax payments. EOT transactions are commonly funded over a period of five to ten years, while this is usually payable within 10-22 months of completion. This can create pressure for founders who have yet to receive substantial cash proceeds.
“There is an option to pay CGT by instalments, but those instalments are sufficiently high that it rarely helps your cash flow,” Chris said. “The timing can be managed, but only if it is planned for properly rather than assumed away.”
Crucially, the wider benefits of EOT ownership remain unchanged. Employee ownership offers continuity for the business, protection of jobs and culture, long-term employee reward and an exit route that avoids external parties reshaping the company.
According to Chris, this new situation has acted more as a filter than a deterrent, with those focused on people, purpose and long-term legacy remaining committed to the model.
“There is a clearer divide now between tax-led interest and values-led decision making,” he said. “For founders who care about legacy and employees, and who go in with their eyes open on cash flow and tax timing, EOTs remain a very strong option.”
To find out more about Go EO visit https://goeo.uk/
Article from Scott Media
