The UK government has reaffirmed its support for employee ownership as a strategic succession route, emphasising that the core purpose of the EOT regime is to “incentivise and support employee ownership as a viable and sustainable business model.”

The recent changes—reducing CGT relief from 100% to 50%—are presented as a way to promote fairness by ensuring sellers of high-value shareholdings still contribute some tax, while retaining a significant incentive to transition to employee ownership.

The reforms aim to safeguard public finances and ensure the relief delivers value for money as costs have risen far beyond initial forecasts.The original 2013 costing estimated the entire EOT tax regime would cost less than £100 million in 2018-19.

However, the CGT relief alone reached £600 million in 2021-22, and forecasts suggest it could rise to more than £2 billion by 2028-29 without intervention—over 20 times the original estimate.

Notably, around half of the relief has been going to the largest 10% of disposals.

Employee ownership expert Graeme Nuttall commented:

The October 2024 budget had already introduced several changes to the EOT regime, including a longer clawback window for gains, tighter rules on trustee independence, and strengthened UK residence requirements. It's clear the government is committed to ensuring that EOT transactions are driven by principles rather than tax arbitrage.

The Office for Budget Responsibility anticipates a behavioural shift: fewer business owners using EOTs purely as a tax strategy, and a market increasingly shaped by genuine succession and long-term stewardship. As the Employee Ownership Association puts it: "This is evolution, not retreat."

Founders and boards with live EOT transactions—and those exploring or managing existing EOTs—are now reassessing their plans. The EOA outlined useful guidance here.

A pressing question looms: what value has the taxpayer received for the cost of the relief to date? There are currently no national statistics to quantify the economic, social, or productivity impact of EOTs. With relief now halved, this evidence gap will become more urgent for policymakers and the sector alike.

Despite the reforms, EOTs continue to offer significant advantages over a traditional trade sale. The “cautious valuation” rule introduced in 2024 is now embedded in feasibility work, ensuring that valuations are robust, defensible, and aligned with fiduciary standards.

EOT transactions can still deliver fair market value and compete directly with private equity. For strategic trade buyers, once deal costs are considered alongside the EOT’s substantial tax benefits, they often need to offer materially higher multiples to match the financial outcomes of an EOT sale. The benefit frequently swings back toward employee ownership.

The policy changes underscore a broader challenge: while succession planning has never been more important, most business owners remain unprepared. Research shows that 69% of family business owners have no succession plan in place, with most planning to exit within the next decade. The top reason? Simply "haven't got around to it." This intention–action gap is a systemic risk to jobs, communities, and supply chains—but also a major opportunity. Owners need structured, localised support well before external pressures force a decision.

In May 2026, we will launch Succession Ready in Huddersfield, West Yorkshire—a regional initiative designed to turn succession intention into action.

The programme provides owners with the time, clarity, and confidence to explore all succession routes: employee ownership, trade sale, or family transition.

Using granular regional data, Succession Ready identifies succession risk at a local level and creates a trusted pathway for owners who have not yet engaged with specialist advice.

The aim is simple: ensure that business owners have the information and support they need to make informed, timely decisions about their company’s future—whether that route is employee ownership or another option.

Owners and advisers must continue to consider the full suite of succession options. Even with reduced relief, the EOT framework remains a compelling route for those committed to employee ownership, cultural continuity, and long-term resilience.

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