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Written question asked by Jim McMahon (Labour) on Tuesday, 18 November 2025, in the House of Commons. It was due for an answer on Thursday, 20 November 2025. It was answered by Dan Tomlinson (Labour) on Thursday, 27 November 2025 on behalf of the Treasury.

Employee Ownership

Question

To ask the Chancellor of the Exchequer, what assessment her Department has made of effectiveness of the tax incentives available to increase the formation of Employee Ownership Trusts.

Answer

An evaluation of the Employee Ownership Trust (EOT) tax regime commissioned by HMRC and published in May 2025 found that the tax reliefs encourage company owners to transition their companies to employee ownership under the EOT model. This evaluation can be found at GOV.UK here: https://www.gov.uk/government/publications/qualitative-evaluation-of-employee-ownership-trusts

However, the cost of the Capital Gains Tax (CGT) relief has increased significantly in recent years. The original costing from 2013 suggested the entire EOT tax regime would cost less than £100m in 2018-19. The cost of the CGT relief alone reached £600m in 2021-22 and forecasts suggest it could rise to more than 20 times the original costing to £2 billion by 2028-29 without any action.

The relief also allowed wealthy business owners to sell their shares without paying any CGT, with around half of the relief going to the largest 10% of disposals.

At Budget 2025, the government announced that it will reduce the relief available on these disposals from 100% of the gain to 50%. This will retain a strong incentive for employee ownership whilst ensuring that business owners pay their fair share of tax. The relief remains more generous than alternative reliefs that individuals might use when disposing of their companies, such as Business Asset Disposal Relief.

Secondary information

Type
Written question
Reference
92050
Session
2024-26
Subjects
Tax allowances Trusts Employee ownership
Link
View this Written question on www.parliament.uk