When transitioning to employee ownership – sellers that sell their shares to an EOT will only be required to pay 50% capital gains tax (CGT) on their gain.

In practical terms, with CGT chargeable on 50% of the gain and no Business Asset Disposal Relief (BADR) to be applied, this means that most sellers who sell to an EOT will be paying 12% tax overall on the sale of their shares.  It’s worth highlighting this remains a lower rate of tax than BADR, which only applies to the first £1m of gains and currently sits at 14%, rising to 18% in April 2026.  It is obviously also significantly lower than the main rate of CGT of 24%, so there is still a meaningful tax incentive for selling shares to an EOT. Note that the 50% capital gains tax relief only applies to sales made to an EOT in the first tax year of its existence.

Employees can be paid certain bonuses up to £3,600 per year free from income tax (but not free of national insurance contributions).

However to be a qualifying EOT the trust must hold a majority (more than 50%) of the shares in the company.

An EOT can be used with other tax incentivised share schemes like enterprise management incentive (EMI) options and share incentive plans (SIPs).