28 November, 2025

With talk of reductions to cash ISA limits, mansion taxes and changing EV subsidies, you’d be forgiven for missing the announcement in Wednesday’s budget of changes to capital gains tax rules as they apply to Employee Ownership Trusts (EOTs). Good Business – as of 1st August 2025 – is owned by our employees and so this news didn’t pass us by.  

Effective immediately, 50% of the gain made by owners of businesses when they sell shares to a newly established EOT will be subject to CGT, a significant change from the previous arrangements where the entire gain was tax free.  

The current EOT arrangements were established in 2013 to support businesses wanting to preserve culture, jobs and independence. While the tax benefits made the sale of shares by a founder to an EOT (rather than to a competitor or a private equity firm) an attractive option financially, the main intention was always to provide an exit route for founders that allowed them to secure their legacy and permit employees to benefit directly from the future success of the business, while strict oversight from HMRC prevented inflated valuations.  

EOTs were experiencing their moment in the sun. In 2024, the number of new EOTs rose by 25% from 2023 levels and estimates suggest that there are now over 1650 employee-owned businesses in the UK. This upturn is likely what prompted the government’s decision to cut CGT relief – Rachel Reeves indicated in her budget speech that the scheme now costs the UK government around £2bn in lost tax receipts, 20 times more than originally predicted. This decision is likely to put the brakes on the expansion, with the result that many founders will look at other exit routes.  

We think this is a great shame. While the tax relief has of course played a part in the decision of many owners to sell to employees, the reality is that the employee ownership model brings many benefits, securing the long term futures of businesses around the country. While it may have been more successful than originally anticipated, with data suggesting that EOTs yield multiple long term financial and cultural benefits, the decision to remove the incentive to founders seems short-sighted.  

Our decision, as we explained at the time, was driven by a desire to secure the future of the business in a way that aligned with our values. Working life ends up being a lot of our life, and we wanted current and future colleagues to experience working life that is fulfilling, impactful and connected. While that could have happened under a change of ownership, that wasn’t a given in the longer term, hence the decision to establish an employee-owned model. In an economy that is challenged by low productivity, precarious employment and uncertainty, employee ownership provides a way for employees to benefit from growth, a shared sense of purpose and a degree of autonomy that more traditional exit routes do not. Sacrificing that for a measure that will raise – at best – an estimated £900 million seems short-sighted in the extreme. 

By Claire Jost