Employee Ownership Trusts: Why They’ve Been Growing in Popularity

Over the past decade, Employee Ownership Trusts (EOTs) have moved from niche succession planning tools to one of the most popular exit strategies for UK business owners. From professional services firms to manufacturing, retail to engineering, a growing number of entrepreneurs are turning to employee ownership — not just to secure a tax-efficient sale, but to protect their company’s legacy and reward loyal employees.

But what’s behind this rise in popularity? And why are EOTs increasingly seen as a smart, sustainable exit route? Let’s explore.

What Is an Employee Ownership Trust?

An Employee Ownership Trust (EOT) allows a business owner to sell a controlling interest (more than 50%) of their company to a trust, which holds the shares on behalf of all employees.

The EOT model:

• Enables a 100% capital gains tax (CGT) exemption for the selling shareholders (if qualifying conditions are met)

• Gives employees indirect ownership without needing to buy shares individually

• Provides long-term business continuity, with no external buyer required

• Offers a structured, government-recognised succession plan

Since its introduction in the 2014 Finance Act, the EOT model has become a powerful, tax-efficient alternative to traditional trade sales or private equity exits.

Why Are EOTs Becoming So Popular?

1. Attractive Tax Benefits

One of the most compelling drivers is the potential 0% CGT for qualifying business owners.

Unlike traditional business sales (subject to Capital Gains Tax at 10%–24% depending on reliefs and income), EOTs offer a complete CGT exemption on the sale of shares — provided the business meets the rules set out by HMRC. In a tax environment where reliefs such as Business Asset Disposal Relief are becoming less generous, EOTs offer certainty and potentially significant savings.

2. Control and Legacy Preservation

Selling to a third party often means surrendering control — and sometimes seeing your business absorbed, restructured, or relocated.

An EOT allows business owners to protect the culture, values and independence of the business they built. It’s particularly appealing to founders who want to preserve their legacy and avoid selling to private equity or consolidators. Many owners stay involved as a board adviser or consultant post-sale — maintaining strategic influence without operational responsibility.

3. Employee Engagement and Retention

Businesses owned by EOTs often see improved employee motivation, retention, and performance. Ownership gives employees a direct stake in the company’s success, often backed by profit-sharing bonuses (up to £3,600 per employee per year tax-free). For founders who value their team and want to leave the business in good hands, the EOT offers a meaningful way to reward loyalty and commitment.

4. Private, Off-Market Sale Process

Unlike trade sales, EOTs do not require business owners to run a public sale or confidential auction process. This can reduce the risk of disruption, speculation, or staff anxiety.

It also allows owners to move at their own pace — with many choosing a phased transition over months or years.

5. Government Support and Credibility

The UK Government continues to support EOTs as a recognised and legitimate succession route. Even with recent reforms (October 2024) aimed at tightening governance and trustee independence, the core tax benefits remain intact — reinforcing long-term political backing for employee ownership.

The growth of EOTs has also been supported by mainstream finance providers, legal firms, and accountants who now offer specialist EOT advice and funding solutions.

Is an EOT Right for Your Business?

While EOTs are growing in popularity, they are not suitable for every business. Key suitability factors include:

• A trading company (or group) based in the UK

• Consistent profitability and cash flow to support a vendor payment plan

• A strong and stable team that can continue the business post-sale

• A seller motivated by legacy, culture, and long-term continuity

If your business meets the qualifying conditions, an EOT can be a powerful exit strategy that rewards you and your employees — tax efficiently and with integrity.

How EOT.co.uk Can Help

At EOT.co.uk, we specialise in helping business owners assess, plan and implement employee ownership transitions. We offer:

• Feasibility reports and business valuations

• Guidance on tax, structuring, and funding options

• Trustee and governance support

• Liaison with your accountants and legal advisers

• A confidential, step-by-step approach from planning to completion

The rise of Employee Ownership Trusts reflects a broader shift in how entrepreneurs are choosing to exit — with a focus on people, values, and long-term stewardship. With the right planning, an EOT offers not only a tax-free exit, but a way to secure your legacy and empower the next generation of leaders.

Thinking about employee ownership for your business? Visit www.EOT.co.uk to download our free guide or book a confidential discovery call with one of our EOT specialists.