Rachel Reeves has announced an immediate reduction of capital gains tax relief for Employee Ownership Trusts (EOTs) from 100 percent to 50 percent.
The move aims to preserve an incentive for these types of companies while supporting government forecasts for increasing revenue from £14bn this year to £30bn by 2030. This is estimated to raise £0.9bn a year from 2027‑28 onwards.
An EOT is a structure in which a company’s shares are held in a trust, and until now, selling a business to an EOT was fully exempt from capital gains tax (CGT).
The full budget report was leaked on the internet almost an hour earlier than Rachel Reeves’s budget announcement in the House of Commons. In the leaked report, the Office of Budget Responsibility’s (OBR) forecast said: “This includes a behavioural effect which reduces the costing to reflect individuals mitigating their CGT liability through means such as holding on to shares longer before realising gains.”
