With the reduction in Capital Gains Tax (CGT) relief in the 2025 Budget, there’s been a pause in transitions during the first few months of the year.
This was a reasonable response to a change in working practices as we sought clarity from HMRC on how the tax is paid, and business owners who were mid-deal reassessed their options.
We’re now seeing sales to Employee Ownership Trusts (EOTs) picking up again, and we’ve been working closely with our Specialist Advisors and Supporter members to monitor deal flow in 2026.
“It’s understandable that a big change like this disrupts the market and business owners that may have spent months planning a transition to employee ownership need to take some time to take stock and understand their options under the new tax regime,” said James.
“We’re hearing some transitions have been postponed until the new tax year or even later in the year to allow businesses to build up greater cash reserves to offset the new tax payments.
“But EO remains a favourable option because it continues to help protect the business that founders have built up and reward the employees that have helped them build it.”
Early evidence suggests that, leaving aside the primary drivers of becoming employee owned outlined above, the EOT still remains the most competitive option for exiting founders in most cases.
The call for updated formal guidance from HMRC is essential to give business owners the confidence to proceed with employee ownership. Although we’ve been informed this is being updated, we don’t currently have a timeline for when it will be published.
Wider commentary reveals 2025 to have been a slower year for business sales and exits across the board, driven by retirement, equity release, and timing due to taxes and Business Asset Disposal Relief (BADR). However, greater momentum is expected throughout 2026.