CGT: 0% Relief on EOT Sales Potentially at Risk
The 0% Capital Gains Tax (CGT) relief on sales to Employee Ownership Trusts (EOTs) must be considered at risk in the upcoming October Budget.
EOTs Becoming a Significant Share of Business Sales
This concern arises because EOTs are the fastest growing option of all business sales structures, and from March 2026, the general CGT rate on business sales is set to increase to 24%.
The contrast between 0% and 24% is stark—making the relief an obvious outlier at a time when tax rises appear increasingly unavoidable.
Mounting Pressure for Tax Increases
The pressure for tax increases is mounting due to a significant fiscal gap:
- Public borrowing is currently running £20 billion above forecasts, driven by higher debt interest costs and rising welfare spending.
- The Office for Budget Responsibility (OBR) and leading economists have warned that this shortfall must be addressed in the Autumn Budget.
- Chancellor Rachel Reeves has already ruled out increases to major headline taxes such as income tax, VAT, and employee National Insurance.
Fewer Options Left: Reliefs and Allowances in Focus
That leaves fewer politically viable options—such as freezing tax thresholds (fiscal drag), or revisiting reliefs and allowances including CGT, inheritance tax, and potential wealth or property levies.
Is the 0% CGT Relief on EOTs Too Generous?
While governments have long promoted employee ownership, the 0% CGT relief on EOT sales may be seen as too generous, particularly in the current fiscal climate.
What Does This Mean for Business Owners?
For those who have already completed a sale to an EOT, any changes are very unlikely to be retrospective. However, for business owners currently considering an EOT transaction, it’s possible that reforms could be announced in the Autumn Budget—or more likely, implemented from March 2026 in line with broader CGT changes.
Contact us
If you would like more information about our services or case studies on our recent EOT deals, please visit our website at https://avondale.co.uk. Alternatively, if you would like a free consultation with one of Avondale’s experienced M&A advisors, please call us at +44 (0)1737 240888, email us at av@avondale.co.uk, or fill out the attached form, and we will get in touch straight away.
This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for any specific tax, legal or accounting advice. Regulated advice bespoke to your circumstances is essential.
