Reeves puts brakes on employee ownership: tax changes explained for contractors
Reviewed by Tom Sullivan
First reported on The Construction Index
30 Second Briefing
Chancellor Rachel Reeves will cut capital gains tax relief on disposals to employee ownership trusts from 100% to 50%, targeting a scheme now projected to cost £2bn in foregone revenue since its 2013 launch and affecting recent EOT conversions at firms such as Gilbert-Ash, Conlon Group, Cheetham Hill Construction and Martin-Brooks Roofing. The change is expected to save £900m a year, alongside frozen income tax and employer NIC thresholds from 2028/29 projected to raise £8bn through fiscal drag. Salary-sacrifice pension contributions will become taxable, adding £4.7bn, with a 2-point rise on dividend, property and savings tax rates raising a further £2.1bn.
Technical Brief
- Capital gains tax relief reduction applies specifically to disposals into Employee Ownership Trust (EOT) structures.
Our Take
For UK contractors such as Gilbert-Ash and Cheetham Hill Construction, the cut in employee ownership trust (EOT) relief and the 2028/29–2030/31 tax threshold freeze together mean succession planning now has to be weighed directly against higher ongoing payroll and dividend tax leakage in financial models.
The Treasury’s projected £900m per year saving from the EOT change is modest compared with the £8bn expected from freezing income tax and NIC thresholds, signalling that labour cost pressures, rather than ownership structures, will be the dominant tax driver in UK construction pricing over the next Parliament.
Within our Policy coverage, this is one of the few pieces where construction SMEs like Conlon Group and Martin-Brooks Roofing are directly exposed to overlapping tax levers (capital gains, income, dividends and pensions), which is likely to accelerate moves toward alternative exit routes such as trade sales or management buyouts instead of EOTs.
Prepared by collating external sources, AI-assisted tools, and Geomechanics.io’s proprietary mining database, then reviewed for technical accuracy & edited by our geotechnical team.
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