Announced in the 2026 Budget, the relief is designed to benefit founders and significant early shareholders of UK businesses that meet specific ownership, growth and innovation criteria.
What is changing?
- Lower CGT rate: Qualifying individuals will pay just 10% Capital Gains Tax on eligible gains when selling shares in their company.
- £10 million lifetime allowance: The relief will apply to up to £10 million of qualifying lifetime gains per individual, subject to reductions for other reliefs claimed.
- Multiple shareholders: Eligible co-founders can each benefit from the relief, provided they meet the qualifying conditions.
- Changes to Business Asset Disposal Relief (BADR): From April 2027, the BADR lifetime allowance will reduce from £1 million to £500,000, with the CGT rate remaining at 18%.
Who can qualify for Founders’ Relief?
The new relief is aimed at individuals who have established or invested significantly in UK trading businesses that have demonstrated substantial growth or innovation.
To qualify, individuals and their companies must meet several conditions:
- Minimum 25% founding shareholding: Individuals must have held at least 25% of the company’s ordinary shares, with corresponding rights, when the business started trading or preparing to trade. Subsequent dilution does not automatically prevent eligibility.
- Five-year ownership: Shares must have been held for at least five years before the sale.
- UK residency: Individuals must have been UK tax resident for at least five consecutive tax years before selling.
- Business size: The company must have turnover of at least £10 million and at least 15 qualifying full-time employees in the accounting period before the sale.
- Growth or innovation: The business must meet at least two of three tests relating to turnover growth, employee growth or qualifying research and development expenditure.
The company must also meet UK trading and presence requirements. These conditions mean that not all business owners will qualify, even where they have held shares for several years.
What does this mean for business owners?
For eligible shareholders planning to sell their business, Founders’ Relief could significantly reduce the Capital Gains Tax payable on a sale.
However, with changes to Business Asset Disposal Relief also taking effect in April 2027, it is important to understand which reliefs may be available and how the timing of a business sale could affect the tax position.
The Founders’ Relief rules are currently subject to technical consultation until 30 November 2026 and may change before implementation.
Find out more
This update was prepared by Finerva, our scale-up specialist team. For a detailed explanation of the qualifying conditions, growth requirements and how Founders’ Relief compares with Business Asset Disposal Relief, read Finerva’s full article:
Award-winning chartered accountants offering tax, audit and advisory services.
