Founders' Relief explained: 10% CGT on up to £10m of gains

Founders’ Relief is a new capital gains tax relief announced in Budget 2026. It will tax qualifying gains at 10%, on up to £10 million of gains over a person’s lifetime, for founders and early investors in the UK’s fastest-growing companies. It applies to disposals on or after 6 April 2027, and its detailed design is out for consultation until 30 November 2026.

What was announced

In his Budget speech the Chancellor, John Healey, described the relief as “a 10% rate on lifetime gains of up to £10m for the founders of our most successful firms”. It sits alongside a cut in the Business Asset Disposal Relief (BADR) lifetime limit to £500,000 from the same date, and the government’s response to its call for evidence on tax support for entrepreneurs explains the logic: reward founders who build high-growth companies in the UK, rather than giving a broad relief to every business sale.

For comparison, from 6 April 2027:

Claims to BADR or Investors’ Relief made from 6 April 2027 reduce the £10 million Founders’ Relief limit.

Who qualifies: the founder tests

According to HMRC’s tax information and impact note, the individual must:

• have held at least 25% of the company’s ordinary share capital when the trade for which the company was formed, or preparation for it, began (ICAEW reports this includes voting and capital rights)
• have held the shares or securities for at least five tax years before the disposal
• have been UK resident under the statutory residence test for at least five continuous tax years before the disposal

ICAEW’s summary of the consultation notes that, once those conditions are met, the relief would be available on all of the founder’s shares, not just those held when the company started.

Which companies qualify

For a disposal to qualify, the company must:

• be within the charge to UK corporation tax, either UK resident or trading in the UK through a permanent establishment
• have had a substantial UK presence for the five accounting periods before the disposal
• be a trading company, or the holding company of a trading group without substantial non-trading or non-qualifying activities
• still carry on the new trade it was set up for, with no major change in its nature
• have had turnover of at least £10 million and at least 15 qualifying full-time equivalent employees in the accounting period ending in the year before the disposal

It must also meet at least two of these three tests:

1. Turnover growth: average compound growth in turnover of 25% a year across three consecutive accounting periods within the ten years before the disposal, with turnover of at least £10 million in the accounting period before the first of those three.
2. Headcount growth: average compound growth of at least 25% a year in qualifying full-time equivalent employees across three consecutive accounting periods within the ten years before the disposal, with at least 15 full-time employees in the period before the first of those three.
3. R&D: at least £1.5 million of qualifying R&D expenditure on which the company met the conditions for, and claimed, R&D tax relief, for an accounting period or periods ending within the three years before the disposal.

Trades excluded from the Enterprise Investment Scheme, such as dealing in land, financial services and property development, will not qualify. Listed and unlisted companies can both qualify.

How claims will work

The relief will be claimed on the individual’s Self Assessment return, with a supplementary form. Because the founder needs company information to show the tests are met, the companies concerned may have to provide records to their shareholders, and the legislation will include rules on access to company records and anti-avoidance provisions. HMRC estimates about 600 individuals a year will be eligible, connected with about 400 companies, at a cost to the Exchequer of £260 million in 2027-28 and around £300 million a year by 2031-32.

Worked example

A founder who meets every test sells shares for a qualifying gain of £5 million on or after 6 April 2027. Ignoring the annual exempt amount, Founders’ Relief taxes the gain at 10%, giving £500,000 of CGT. Without any relief the same gain would cost £1.2 million at 24%. The saving is £700,000.

What it means for accountants and their clients

Most owner-managed businesses will not qualify. The £10 million turnover and 15 FTE floors, the growth tests and the 25% founding stake mean the relief is aimed at a small group of scale-ups. For the typical owner-managed company, the relevant change is the halving of the BADR limit.

Start building the evidence now. For clients who might qualify, the tests reach back up to ten years. Practices should be able to show the shareholding at the start of trading, the dates trading and preparation began, turnover and FTE figures by accounting period, R&D claims and the company’s UK presence. Company secretarial records, payroll data and past CT600s will all matter.

Residence history is a trap. A founder who has spent a year abroad within the five years before a sale may fail the five continuous years test. Flag this for globally mobile founders before any move is planned.

Watch the ordering of claims. BADR and Investors’ Relief claimed from 6 April 2027 eat into the £10 million limit, so a founder with several companies should plan which disposals use which relief.

Respond to the consultation. The government is asking about the practical application of the relief until 30 November 2026. ICAEW is collecting member views for its own response until 13 November 2026.

For background on existing reliefs for founders and investors, see our guide to SEIS and EIS for founders and to CGT on shares.

Frequently asked questions

When does Founders’ Relief start?

It applies to qualifying disposals of shares or securities made on or after 6 April 2027. It will be legislated by amendments to Finance Bill 2026-27 after the technical consultation closes on 30 November 2026.

What rate of CGT does Founders’ Relief give?

A 10% rate on qualifying gains, up to a lifetime limit of £10 million per individual. Gains above the limit are taxed at the normal rates.

Can early investors claim Founders’ Relief?

The relief is described as being for founders and early investors, but the individual must have held at least 25% of the ordinary share capital when the trade or preparation for it began. Smaller early investors are more likely to rely on EIS, SEIS or Investors’ Relief.

How does Founders’ Relief interact with BADR?

Any BADR or Investors’ Relief claimed from 6 April 2027 reduces the £10 million Founders’ Relief lifetime limit. Where a disposal qualifies for Founders’ Relief, its 10% rate is lower than the 18% BADR rate.