Have the 2025 Budget tax changes stalled growth in the employee ownership sector?
The November 2025 Budget brought a change to the Capital Gains Tax (CGT) relief on sales to Employee Ownership Trusts (EOTs). The CGT relief specific to EOTs now only applies to 50% rather than 100% of the proceeds, for sales on/after 26 November 2025.
A question mark has hung over the sector since this change around whether it would slow the growth of a model which had been steadily increasing for the last decade.
The latest data released by the eoa offers some answers.
What were the tax changes?
Under the previous rules, founders selling their business to an EOT paid no CGT on the sale proceeds. From 26 November 2025, CGT applies to 50% of the gain. For most vendors, that works out to an effective rate of 12% on the sale proceeds.
It’s worth noting that the CGT saving remains a significant tax benefit. Compared to a standard disposal at 24%, or BADR at 18% (capped at £1m), a qualifying EOT sale continues to represent one of the most tax efficient exit routes available.
What the numbers show
The March 2026 edition of the eoa's Employee Owned Business Register puts the current total of employee owned businesses in the UK at 2,824, with around 547,971 employee owners working within them. There were around 500 transitions to employee ownership in 2025, broadly in line with previous years.
The picture for early 2026 is more mixed. With the new rules taking immediate effect from budget day, and formal HMRC guidance still outstanding on some areas (such as exactly how instalments can be applied for), some founders paused to reassess. Others who might have sold in Jan-Mar 2026 opted to push transactions after 6 April, delaying the CGT due date, giving more time to build up cash reserves to settle it. The eoa data confirms that EOT transitions are now picking up again.
More than a tax break
For many founders, the decision to sell to an EOT is not just about cashing in and enjoying a generous tax perk. It’s about leaving a legacy and making sure their business has a strong chance to thrive into the future. Through an EOT, a founder can actively protect their business's identity, independence and employees. In an employee owned business, the team takes forward the values and culture.
This story of a successful future is borne out by the data. The eoa's People Powered Growth report from 2023, clearly demonstrated that employee owned businesses are on average 8-12% more productive than traditional businesses. They are also 50% more likely to expand their workforce.
A recalibration, not a reversal
The eoa's latest data tells the story of a sector that is adjusting to a change. There was a slowdown in early 2026, but according to the eoa statistics, transitions are now recovering. This aligns with our own experiences, where we had just three sales in the quarter Jan-Mar 2026, followed by five sales in April alone.
Employee ownership has grown from a handful of businesses in 2014 to nearly 2,900 today. Even though the tax position has changed, the reasons founders choose this route (protecting what they built, rewarding the people who helped build it) have not.