EOT vs trade sale: which exit is right for you?
Most owners weigh an Employee Ownership Trust against the exit they already know: selling to a trade buyer or private equity. Here is the honest comparison — tax, price, speed, confidentiality and what happens to the people — with the numbers as they stand after the November 2025 Budget.
The short version
A trade sale gives you cash on completion and a clean break, and you pay Capital Gains Tax at 18% on the first £1m of qualifying gain (Business Asset Disposal Relief) and 24% above it. An EOT sale is paid from the company's own profits over time, keeps the name and the team intact, and only half the gain is taxed — an effective 12% for a higher-rate taxpayer. The EOT is still the cheaper exit on tax. Whether it is the right exit depends on how quickly you need the money and what you want to happen to the business after you leave.
Side by side
| Compared on | Employee Ownership Trust | Trade sale or private equity |
|---|---|---|
| Capital Gains Tax | 50% of the gain is relieved. At the 24% higher rate that is an effective 12%; the deferred half only comes into charge if the trustees later sell. BADR cannot be added on top. | 18% on the first £1m of lifetime qualifying gains (BADR, from 6 April 2026), 24% on the rest at the higher rate. |
| Price | Independent market valuation. HMRC requires the trustees to take reasonable steps not to overpay, so the number has to be defensible. | Whatever a buyer will pay — sometimes a strategic premium, often an earn-out that moves risk back to you. |
| How you are paid | Usually a deposit from company reserves, then instalments from future profits (a vendor loan). Bank funding can bring cash forward. | Cash on completion, less anything held in escrow or deferred through an earn-out. |
| Speed | Typically three to six months from feasibility to completion. There is no buyer to find. | Depends on finding and keeping a buyer; a marketed sale process with due diligence usually takes longer. |
| Confidentiality | No sale process, no data room for rivals, no staff hearing rumours. | Competitors and customers often learn the business is for sale during the process. |
| Your team | Same leadership, same name. Every employee benefits through the trust and can receive up to £3,600 a year in income-tax-free bonuses. | New owners decide. Integration, rebranding and redundancies are common outcomes. |
| Your role afterwards | You can stay on as a director or employee and step back gradually. Since 30 October 2024 you cannot control the trust itself. | Usually a handover period, then out. |
| Certainty | Your payment depends on the business staying profitable. | Cash certainty on the day, at the price the buyer set. |
| Undoing it | If a disqualifying event happens within four tax years, the relief is clawed back from you. | Done is done. |
The tax, worked through
Take a £4m gain for a higher-rate taxpayer.
- Trade sale: 18% on the first £1m (£180,000) and 24% on the remaining £3m (£720,000). About £900,000 of tax.
- EOT: half the gain, £2m, is relieved. The other £2m is taxed at 24%. £480,000 of tax — an effective rate of 12%.
That is the gap the November 2025 Budget left after halving the relief: the EOT still saves this seller roughly £420,000. Before the cut it would have saved the whole £900,000, which is why "sell tax-free" was the headline for a decade and why it no longer is.
We model this on your actual numbers before you spend anything — including whether you qualify for BADR at all, and what a deferred payment schedule looks like against the company's forecast.
When a trade sale is the better answer
We are accountants, not brokers, so we will say it plainly:
- You need the money on completion. An EOT pays you over time from profits. If you want a lump sum on day one and cannot wait, a trade sale is the route.
- A buyer will pay a strategic premium. If a competitor values your customer list or contracts above what the business earns, the price can outweigh the tax.
- The business cannot fund the purchase. If profits are thin or lumpy, instalments from those profits are a risk to you, not a plan.
- You want a clean break from the business and the people. Some owners do, and that is fine.
When the EOT wins
- You want the name and the team to outlive you, not to be absorbed.
- The business is profitable and can afford to buy you out over a sensible period.
- There is no obvious buyer, or you do not want rivals inside your numbers.
- You would rather step back gradually than be out the door on completion.
- You want the tax position of a 12% effective rate rather than 18–24%.
Not sure which column you sit in? The 30-second quiz gives you a first read, and a free call gives you a real one.
Questions owners ask us
Is an EOT still worth it after the relief was halved?
For most sellers who were considering one for the right reasons, yes. The tax advantage over a trade sale shrank but did not disappear: 12% effective against 18–24%. If your only reason was the 0% rate, that reason has gone, and we will tell you so.
Can I combine an EOT with a trade sale later?
The trustees can sell the company in future if it is right for the employees. The deferred half of your gain would then come into charge, and within the first four tax years a sale can trigger a clawback of your relief. It is a safeguard, not the plan.
Do I get paid less with an EOT?
The valuation is market value either way. What differs is timing and certainty: a trade buyer pays on completion; an EOT pays from profits over time, so the risk of the business underperforming sits with you until the last instalment.
What about private equity?
Private equity is a share sale on the same CGT rates as a trade sale, usually with a full or majority exit, an earn-out, and a new owner whose plan may not include your name or your team. The comparison above applies.
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Written by Parag Patel | Strategy and Tax Planning Consultant
Parag leads the Exit Better team at JLA Accountants, advising owners on employee ownership, succession and the tax that comes with both.
About the team