Autumn Budget 2026 handed company founders a genuinely new tax break. From April 2027, people who build and then sell a high-growth business could pay Capital Gains Tax at just 10% on up to £10 million of their gains, through a new relief called Founders' Relief. For a successful exit, the saving against standard rates runs into hundreds of thousands of pounds.
Founders' Relief is not yet law. It was announced at Autumn Budget 2026 and is going through a technical consultation before it is written into legislation. This guide explains, in plain English, what the relief does, who is expected to qualify, how it compares with Business Asset Disposal Relief, and what founders should be doing now. Every figure is checked against gov.uk, and we flag clearly where the detail is still a proposal rather than settled law.
What is Founders' Relief?
Founders' Relief is a proposed new Capital Gains Tax relief that would charge a reduced 10% rate on up to £10 million of lifetime gains for eligible founders of high-growth, innovative companies when they sell their shares. It was announced at Budget 2026 and would apply to qualifying disposals made on or after 6 April 2027.
The aim, set out in the HM Treasury Founders' Relief technical consultation, is to reward the people who commit years of time and expertise to start and scale a business, and to encourage more founders to build their companies in the UK. The relief sits alongside the normal Capital Gains Tax regime rather than replacing it, so founders who do not qualify, or gains above the £10 million cap, are taxed under the usual rules explained in our complete guide to Capital Gains Tax.
How does Founders' Relief compare to Business Asset Disposal Relief?
Founders' Relief, Business Asset Disposal Relief (BADR) and standard Capital Gains Tax all tax share sales, but at very different rates and limits. Founders' Relief offers the lowest rate, 10%, on the largest amount, £10 million, but with the tightest eligibility tests. BADR charges 18% on a smaller lifetime limit that is itself being cut from April 2027.
| Feature | Standard CGT | Business Asset Disposal Relief | Founders' Relief (proposed) |
|---|---|---|---|
| Rate on qualifying gains | 18% / 24% | 18% | 10% |
| Lifetime limit | No limit | £500,000 from 6 April 2027 (down from £1m) | £10 million |
| Who it targets | All taxpayers | Owners with a 5%+ stake, officer or employee for 2+ years | Founders of high-growth, innovative companies |
| Status | In force | In force; limit cut proposed for April 2027 | Proposed; consultation to 30 Nov 2026 |
From 6 April 2027 the BADR lifetime limit falls from £1 million to £500,000, confirmed on GOV.UK, with the rate staying at 18%. Importantly, the £10 million Founders' Relief cap is reduced by amounts you have claimed under the BADR and Investors' Relief limits from 6 April 2027, so the reliefs effectively share one lifetime allowance rather than stacking on top of each other. Our guide to Business Asset Disposal Relief explains the existing relief in full.
Who qualifies for Founders' Relief?
To qualify as an individual under the proposed rules, you would need to have held at least 25% of the company's ordinary share capital, with matching voting rights and rights to profits and assets, and to have held those shares for at least five years before the sale. You must also be UK resident for tax in at least five continuous tax years before the disposal.
Only individuals can claim, not companies or trusts, and more than one founder of the same company can claim because each must separately meet the 25% test. The 25% holding can be met through a holding company in some structures. These are the conditions set out for consultation, so the precise wording could change before the relief becomes law. Founders planning an exit, including sellers of online businesses covered in our guide to selling an ecommerce business and the BADR and valuation rules, should map their shareholding against these tests early.
What are the company, growth and innovation conditions?
The company itself must also qualify. In the accounting period before the sale it has to be a trading company, or the holding company of a trading group, with turnover of at least £10 million and at least 15 qualifying full-time employees working 35 hours or more a week and paid at least the National Minimum Wage. On top of that, the business must pass two of three growth and innovation tests.
| Test | What the company must show |
|---|---|
| Turnover growth | Average compound turnover growth of at least 25% across three consecutive accounting periods within the ten years before sale, with turnover of at least £10 million in the final period |
| Headcount growth | Average compound growth of at least 25% in qualifying full-time employees across three consecutive periods, with at least 15 full-time employees |
| Innovation | At least £1.5 million of qualifying research and development expenditure on which the company made an R&D tax relief claim |
A company needs to meet at least two of these three tests, so a business that is scaling fast on revenue and headcount can qualify without any R&D spend, while a research-heavy company can lean on the innovation test. These thresholds are deliberately high: Founders' Relief is aimed at genuine high-growth scale-ups, not every small limited company. If you run a growing company, our limited company team can help you check where you stand against each test.
How much could Founders' Relief save you?
The saving is large because the gap between 10% and the standard 24% higher rate is wide. Take a founder who meets all the conditions and sells their shares for a £4 million gain. Under Founders' Relief they would pay 10%, a Capital Gains Tax bill of £400,000. Taxed at the standard 24% higher rate, the same gain would cost £960,000.
| Step | With Founders' Relief | Standard higher-rate CGT |
|---|---|---|
| Gain on sale of shares | £4,000,000 | £4,000,000 |
| Capital Gains Tax rate | 10% | 24% |
| Tax due | £400,000 | £960,000 |
| Kept by the founder | £3,600,000 | £3,040,000 |
That is a £560,000 difference on a single exit, before counting the £3,000 annual exempt amount that is deducted first. The standard Capital Gains Tax rates of 18% and 24% are confirmed on the GOV.UK Capital Gains Tax rates page. For founders near the £10 million cap, the modelling of which reliefs to use, and in what order, is exactly the kind of planning our Capital Gains Tax service exists for.
When does Founders' Relief start and how do you claim it?
Founders' Relief is expected to apply to qualifying disposals made on or after 6 April 2027. The technical consultation on the detail closes on 30 November 2026, after which the government will finalise the rules and legislate them through amendments to Finance Bill 2026-27. Until that bill passes, Founders' Relief remains a proposal and the conditions could change.
When it is in force, you would claim Founders' Relief in your Self Assessment tax return for the tax year in which the sale takes place, including the information HMRC prescribes to support each eligibility condition. Because much of the evidence, such as turnover, headcount and R&D history, is held by the company rather than the individual, the government proposes a statutory right for founders to request that information from the company. The sensible step now is to keep clean records of your shareholding, the company's growth and any R&D claims, so that a future claim is straightforward. You can book a free call to talk through an exit, or explore our wider tax advisory service.
Frequently asked questions
What is Founders' Relief?
Founders' Relief is a proposed Capital Gains Tax relief, announced at Autumn Budget 2026, that would tax up to £10 million of lifetime gains at 10% for eligible founders of high-growth, innovative companies. It is intended to apply to qualifying share disposals made on or after 6 April 2027, subject to Finance Bill 2026-27.
When does Founders' Relief start?
The relief is expected to apply to qualifying disposals made on or after 6 April 2027. A technical consultation runs until 30 November 2026, and the rules will then be legislated through amendments to Finance Bill 2026-27. Until that legislation is passed, Founders' Relief is a proposal and the final conditions may change.
How is Founders' Relief different from Business Asset Disposal Relief?
Founders' Relief offers a 10% rate on up to £10 million of gains, while Business Asset Disposal Relief charges 18% on a lifetime limit that falls to £500,000 from 6 April 2027. Founders' Relief has much tighter eligibility, based on company growth and innovation, and the £10 million cap is reduced by BADR and Investors' Relief already claimed.
How much can you save with Founders' Relief?
On a £4 million gain, Founders' Relief at 10% produces a £400,000 tax bill, against £960,000 at the standard 24% higher rate, a saving of £560,000. The relief covers up to £10 million of lifetime gains, so the potential saving across an exit is substantial for a qualifying founder.
Is Founders' Relief law yet?
No. Founders' Relief was announced at Budget 2026 but is still in consultation, which closes on 30 November 2026. It will be legislated through amendments to Finance Bill 2026-27 and is intended to take effect for disposals on or after 6 April 2027. The detailed conditions could change before it becomes law.
Plan your exit around the right relief
Founders' Relief could be one of the most valuable reliefs available to UK founders in a decade, but it rewards those who plan early: the eligibility tests look back over several years of growth, and the £10 million cap is shared with Business Asset Disposal Relief. If you are building towards an exit, it is worth modelling your position now, while the rules are still being finalised, rather than at the point of sale. Zmartly is a CIMA-regulated firm and our qualified accountants can help you plan.
