Founders’ Relief is a proposed new capital gains tax relief for founders and significant early investors in high-growth UK companies. It would tax qualifying gains on share disposals at 10%, compared with standard CGT rates of 18% and 24%, up to a lifetime limit of £10 million of qualifying gains per person, for disposals made on or after 6 April 2027. It is not law yet: the technical consultation closes at 11:59pm on 30 November 2026. Most owner-managed companies are unlikely to qualify, because the company must have at least £10 million of turnover and at least 15 qualifying full-time-equivalent employees in the accounting period before disposal and must also satisfy at least two of three growth or innovation tests. The individual claimant must also meet separate founder, shareholding, ownership-period and UK-residence conditions.
Founders’ Relief is a capital gains tax relief that Chancellor John Healey announced at Budget 2026, aimed at founders and significant early investors in high growth, innovative UK companies. The proposed relief would apply a 10% capital gains tax rate to qualifying gains, subject to the lifetime limit and eligibility conditions. The policy intent is to reward people who build companies capable of creating jobs and growth, rather than to reduce the tax bill on any owner-managed business sale.
That distinction matters. A founder selling a £2 million or £4 million turnover company falls outside the target of this relief, and the draft conditions make that explicit. The proposed tests are deliberately demanding, so the realistic candidates are founder-led companies that have scaled well past the VAT threshold, with a documented growth or research record.
For wider context around the announcement, you can also read our coverage of the Autumn Budget 2026.
The Founders’ Relief technical consultation sets out three conditions for the individual, and all three are proposed as mandatory.
These tests form the core founders relief eligibility requirements for individual claimants.
You must have held at least 25% of the company’s ordinary share capital when the trading activity for which the company was formed, or preparation for that trade, began.
You must have held the shares or securities for at least five tax years before disposal.
You must have been a UK resident under the Statutory Residence Test for at least five continuous tax years before disposal.
Two practical points are worth flagging. You can meet the 25% test through a holding company of a trading group, and the relief does not restrict itself to the original shares you subscribed for, so shares you still hold at sale can qualify if the conditions hold at that point. Only individuals can claim, so a corporate seller cannot use it.
If you were diluted below 25% before trading started, or if the shares were issued later, the proposed design leaves little room. The consultation asks the profession to comment on this area in particular, so the final rules may shift.
The company itself must pass a separate set of tests, and these are where most otherwise sensible candidates fall out:
That last exclusion catches owner-managed companies repeatedly. A business run by two directors with twelve staff does not meet the headcount test, even where the turnover test passes, so no amount of planning at exit will rescue it.
On top of the size tests, the company must demonstrate sustained growth or innovation. It needs to satisfy at least two of the following three, measured across three consecutive accounting periods within the ten years before disposal:
Simple growth is not enough. A company that grew 25% once or grew steadily from a large base will fail the compound growth test because HMRC measures the rate across three consecutive periods from a specified baseline. Companies that grow through acquisition rather than organically should also expect scrutiny of how they construct the figures.
Assume a founder sells shares in 2027, making a £3 million gain, has no other gains in the year, and has the full annual exempt amount available.
The figures below use the published capital gains tax rates and allowances and are illustrative only.
Founders’ Relief saves £419,580 against the no-relief position and £389,580 against the BADR route. On a £10 million gain you reach the 10% cap, which is where the lifetime limit becomes the number that matters.
Founders with substantial other income should also consider what happens to the Personal Allowance above £100,000 income when reviewing their wider personal tax position.
Founders’ Relief does not replace Business Asset Disposal Relief. BADR continues at a rate of 18% for disposals on or after 6 April 2026, but the lifetime limit falls from £1 million to £500,000 for disposals on or after 6 April 2027. Amounts claimed under BADR and Investors’ Relief from that date also reduce your Founders’ Relief headroom, so the two reliefs share a budget rather than stacking freely.
For most owner-managed company owners, BADR remains the relevant relief, and the reduction from £1 million to £500,000 is the change that affects the largest number of people. Timing a sale either side of 6 April 2027 can therefore matter more than eligibility for Founders’ Relief itself.
Before a sale, founders may also want to review the tax implications of taking money out of their company through salary, dividends or other extraction methods.
If you would like a view on whether a share sale is likely to qualify, our tax services team can review your share history, accounts and R&D records, model the CGT position under both reliefs, and set out a timetable.
Book a free consultation with Apex Accountants and Tax Advisors.
No. It was announced at Budget 2026 and the technical consultation runs until 30 November 2026. The government intends to legislate in Finance Bill 2026/27 for disposals on or after 6 April 2027, and the conditions could still change.
BADR applies to qualifying disposals by sole traders, partners and shareholders with a 5% stake, at 18% from 6 April 2026, with a £500,000 lifetime limit from 6 April 2027. Founders’ Relief is narrower on eligibility but far more generous on limit: 10% on up to £10 million of gains, for founders and early investors in high growth companies only.
Under the proposal, no. You must have held 25% of the ordinary share capital with matching rights when trading began. That is a founding test, not a test of your holding at the date of sale.
Per individual. Each qualifying founder has their own £10 million lifetime limit of gains, and more than one founder can claim on the same company, but claims under BADR and Investors’ Relief reduce the headroom available.
The proposal covers disposals of shares by a qualifying individual, provided the conditions hold, and it does not limit itself to a sale of your entire holding. A partial disposal can therefore qualify, subject to the company still meeting the conditions at the point of sale.
Then the company fails the proposed size condition, and the relief would not be available on a disposal, regardless of your shareholding or growth record. BADR may still apply if you meet its separate conditions.
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