Selling to a trade buyer isn't the only way out. A growing number of UK founders are choosing to sell to their own staff instead, even after the tax break that made the route famous got cut in half.
For years, the pitch for an employee ownership trust was almost too neat. Sell your company to your own staff, keep the culture intact, and pay no capital gains tax on the way out. We watched that pitch pull thousands of founders away from the traditional trade sale.
Then, on 26 November 2025, the Chancellor halved it.
We think the more interesting story isn't the cut itself, it's that founders are still choosing the Employee Ownership Trust route anyway.
What an Employee Ownership Trust actually is
An employee ownership trust holds a controlling stake in a company on behalf of every employee, rather than handing shares to a trade buyer or a private equity firm. It was introduced under the Finance Act 2014, modelled loosely on John Lewis Partnership's century-old ownership structure.
The mechanics are simple in outline, if not in execution. A founder sells a controlling interest - more than 50% of the company - to the trust at independently assessed market value. HMRC treats this as a qualifying disposal only if several conditions are met, including that all employees benefit and that no former owner keeps a hidden grip on the trust.
The company itself usually funds the purchase - not the employees personally -through vendor financing, with the price paid back over several years out of future profits. Deferred consideration, in other words: the founder gets paid gradually, not in one lump sum at completion.
Day-to-day running of the business barely changes, directors keep their roles, customers rarely notice.
What changes is who eventually benefits from the profit.
The capital gains tax exemption, before and after
The capital gains tax exemption is what put the Employee Ownership Trust route on the map.
Under the original 2014 rules, a qualifying disposal meant a founder paid no capital gains tax at all - a genuinely rare outcome in UK tax law.
That changed at the Autumn Budget 2025, from 26 November 2025, only half of the gain still qualifies for the capital gains tax exemption; the other half is taxed at the standard rate.
For a higher-rate taxpayer, that works out to an effective rate of around 12%, still comfortably below Business Asset Disposal Relief, which has climbed to 18% as of April 2026, up from 10% just two years ago.
The rules around who can use the structure were also tightened the year before, in the Autumn Budget 2024. A new trustee independence requirement now stops a departing founder from quietly controlling the trust after the sale. Fewer than half the trust's trustees can be the former owner or someone connected to them.
None of this makes the Employee Ownership Trust a "tax-free" exit any more. It makes it a tax-efficient one, which, weighed against a fully taxed trade sale, is still a meaningful gap.
Why founders are still choosing it
The Employee Ownership Association's most recent count puts the number of UK employee-owned businesses at 2,925, as of early September 2026, with the sector on track to pass 3,000 by year end. That's roughly 125 new conversions in 2026 alone.
We spoke to no one who described the tax saving as the whole story. The government's own qualitative review of the structure, published in May 2025, found owners chose it mainly to protect culture and avoid the disruption of a trade sale or a management buyout, not purely to shrink a tax bill.
Searchability, a Warrington-based tech recruitment firm, sold 100% of its shares into an Employee Ownership Trust in April 2025, just months before the relief was cut.
"Our people are key to our success at Searchability. By empowering employees with a sense of ownership, more opportunities to innovate and exciting future career prospects, we are ensuring Searchability thrives as a recruitment company of choice for the tech digital industry." — Martin Blythe, Founder & Trustee Director, Searchability
Compare that with a trade sale, where a buyer can restructure, relocate or absorb the brand entirely, or a management buyout, which concentrates ownership among a handful of existing managers rather than the whole workforce.
Neither route guarantees the company stays recognisably itself and an employee ownership trust, on paper at least, is built to.
The part the pitch leaves out
Here's the tension we keep running into.
An employee ownership trust only works if the company can afford to buy itself.
Because the purchase is usually funded from the business's own future profits, a company needs stable, predictable cashflow to make the numbers work - either to support vendor loans or to service external financing. Thin margins or lumpy revenue make that structure hard to sustain. A management buyout can sometimes move faster with outside debt, and founders who'd rather bank Business Asset Disposal Relief on a smaller gain than wait years for deferred consideration may still prefer it; a trade sale gets paid on day one, whatever the buyer's plans for the business afterwards.
That's arguably why most of the founders choosing this path run established, profitable, owner-led businesses - recruitment firms, consultancies, manufacturers -rather than early-stage, loss-making startups still burning through funding rounds.
It's a structural mismatch worth sitting with rather than glossing over.
We're watching whether that changes as the Employee Ownership Association pushes toward its target of 7,500 employee-owned businesses by 2030. Whether the founders behind the next wave of British startups see an Employee Ownership Trust as a real alternative to a trade sale, or a structure that only makes sense once the growth phase is over, is still an open question.
Also Read: UK Female Founders Built a Boom With One Winner
Sources: Employee Ownership Association (Growth Strategy Update, 3 September 2026); HM Treasury, Autumn Budget 2025; TLT LLP; BDO UK; Saffery; Charles Russell Speechlys; House of Commons Library (Budget 2025: Employee Ownership Trusts); Searchability UK; The Global Recruiter.
