Tax Changes, Exit Planning and Employee Ownership: What Business Owners Need to Know

The 2025 Autumn Budget statement introduced important shifts in capital gains tax (CGT) reliefs and policy approach that will affect how business owners plan exits and transitions in 2026 and beyond. While media headlines have focused on reduced incentives for Employee Ownership Trusts (EOTs) and changes to reliefs that had encouraged such transactions, the practical implications go beyond headline tax rates.

Effective from 26 November 2025, changes announced in the Budget (subject to the Finance Act) reduced the 100% relief from CGT available on qualifying disposals of shares to EOTs to 50%, with the remaining gain likely to be subject to tax.

Other CGT reliefs, such as Business Asset Disposal Relief (BADR), should also be considered. The tax rate applicable on transactions that qualify for BADR which offers a lower CGT rate on qualifying gains has already risen from 10% to 14% from 6 April 2025 and is set to rise further to 18% from 6 April 2026. This relief does and will remain an important tool for reducing tax on the sale of a business or business shares (subject to meeting any relevant conditions and taking specific tax advice).

While tax considerations are important in planning a transaction, not least in the context of a disposal of shares, these should not be the sole driver of a business exit. Owners must contemplate the broader commercial aspects of any sale, such as any future relationship with the business and its new owners, long-term security and the overall value they are due to receive. Opting for a quick sale to benefit from a lower tax rate, at the expense of personal or business goals, may not properly serve the sellers’ best interests, particularly if elements of the business need to be reorganised or rectified before any disposal might take place.

Careful planning with professional advisers of the sellers and the business itself remains an essential task to help navigate constantly evolving rules and eligibility, to ensure that business exits properly align with the owners’ broader strategic and personal objectives.