The proposed new Founders’ Relief announced in the 2026 Autumn Budget could offer a 10% Capital Gains Tax rate on qualifying share disposals from April 2027. While the rules remain subject to consultation, the relief could create valuable opportunities for founders and early investors planning a future business sale.
Autumn Budget 2026: Founders’ Relief: what the new proposals could mean for business owners
The Autumn Budget introduced proposals for a new Founders’ Relief, aimed at individuals who establish or invest early in successful, high-growth UK businesses, providing significant tax Capital Gains Tax savings.
However, with proposed rules and eligibility criteria remaining under consultation, a careful review would need to cover three areas: the founder’s original ownership position; the company’s historic trading activities; and its record of growth and innovation.
What is Founders’ Relief?
Founders’ Relief is a new Capital Gains Tax relief intended to reward individuals who establish or invest early in successful, high-growth UK businesses.
Where the conditions are satisfied, qualifying gains on the sale of shares would be taxed at a 10% CGT rate, subject to a £10 million lifetime limit per individual. The relief is intended to apply to qualifying disposals made on or after 6 April 2027.
Who could qualify?
Broadly, an individual would need to:
Have held their shares or securities for at least five years before selling them.
Have held at least 25% of the ordinary shares in the company, together with corresponding voting, profit and winding-up rights, when the company's trade (or preparation for that trade) began.
Have been UK resident for at least five continuous tax years before the disposal.
A useful feature of the proposals is that the relief would not be limited solely to the founder’s original shares. If the qualifying conditions are satisfied, it could apply to all shares disposed of by the individual. The 25% requirement may also be satisfied through a holding company within a trading group.
What conditions does the company need to meet?
The relief is deliberately targeted at businesses which have reached a meaningful level of scale. Among other requirements, the company would need to:
1)
Be within the scope of UK Corporation Tax and have a substantial UK presence for the five accounting periods before the disposal
2)
Be a trading company or holding company of a trading group, without substantial non-trading or excluded activities.
3)
Continue the trade for which it was originally established, without a major change in its nature.
4)
Have turnover of at least £10 million in the accounting period before the sale.
5)
Employ at least 15 qualifying full-time employees in that period.
The growth and innovation requirement
Simply being a founder and owning 25% of a business will not be enough.
The company must also demonstrate genuine growth or innovation. It would need to satisfy at least two of the following three tests:
1. Turnover growth
Average compound growth in turnover of at least 25% per year across three consecutive accounting periods within the ten years before the sale. Turnover must already have been at least £10 million before those three growth periods began.
2. Employee growth
Average compound growth of at least 25% in qualifying full-time employees across three consecutive accounting periods within the ten years before sale, starting from at least 15 full-time employees.
3. Innovation
The company must have incurred at least £1.5 million of qualifying R&D expenditure, for which it met the conditions for R&D tax relief, and have claimed R&D tax relief for that expenditure for an accounting period or periods ending within the three years before disposal.
So, for example, a company which hasn’t made an R&D claim could potentially still qualify by meeting both the turnover growth and employee growth tests.
How valuable could the relief be?
This has the potential to be very valuable.
Rather than the qualifying gain being subject to the normal CGT rate, Founders’ Relief would provide a 10% rate on qualifying gains up to the £10 million lifetime limit.
However, the £10 million limit would interact with Business Asset Disposal Relief (BADR) and Investors’ Relief. From 6 April 2027, amounts claimed under those relief limits would reduce the amount of the £10 million Founders’ Relief limit available.
How would the relief be claimed?
The individual would claim the relief through their Self Assessment tax return for the year in which the shares are sold. HMRC is considering requiring a standard form containing supporting information alongside the return.
The company may therefore need to provide historical information demonstrating that the relevant turnover, employee, R&D and other conditions have been satisfied. The proposals contemplate giving founders a statutory right to request the necessary information and supporting documents from the company.
Risk if an R&D claim is challenged
There is also a potential risk where qualification depends on an R&D claim.
The consultation expressly notes that if HMRC subsequently challenges the company’s R&D claim and this means the Founders’ Relief conditions were not satisfied, the individual could lose the relief and become liable for the additional tax plus interest.
Read more from the Budget announcement
Company distributions and shareholder exits
Capital allowances changes, simplifying R&D tax relief claims & employee rewards
What the latest payroll and employment tax changes mean for employers
What property owners, landlords and developers need to know
High Value Council Tax Surcharge and Business Rates: what they mean for you
Autumn Budget 2026: What does it mean for individuals and families?
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