Founders' Relief 2027: The New 10% Capital Gains Tax Relief Explained.

What is Founders' Relief?

Founders' Relief is a proposed new Capital Gains Tax relief announced in the October 2026 Budget. It would apply a 10% rate to up to £10 million of lifetime qualifying gains for eligible founders and significant early investors who dispose of qualifying shares or securities. The Government's stated aim is to support people who have made a significant long-term contribution to building high-growth, innovative UK companies, and to keep the UK attractive as a place to start and scale a business. It is deliberately narrower than a general relief for business owners: it is not a universal 10% tax rate for anyone who founded or owns a business.

When does Founders' Relief start?

The proposed commencement date is 6 April 2027, for qualifying disposals made on or after that date. The relief is not yet law: legislation is to be introduced through amendments to Finance Bill 2026, and a technical consultation on the detailed design runs until 30 November 2026. Until the legislation is finalised, every condition described on this page should be read as a proposal that may change.

Who could qualify for the 10% rate?

Under the published proposals, the individual must have held at least 25% of the company's ordinary share capital at the point when the trading activity the company was formed for — or the preparation for that trade — commenced, must have held the shares or securities for at least five tax years before the disposal, and must have been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.

The company must also qualify. The proposals require it to be within the scope of UK Corporation Tax with a substantial UK presence for the five accounting periods before disposal, to be a trading company or the holding company of a trading group without substantial non-trading activities, and to have continued the trade it was established for without a major change in its nature. Companies may be listed or unlisted. Activities in certain sectors — broadly those excluded from the Enterprise Investment Scheme, including dealing in land, financial services and property development — would not qualify.

On top of those conditions, the company must meet proposed scale and growth tests: annual turnover of at least £10 million and at least 15 qualifying full-time-equivalent employees in the accounting period ending in the year before disposal, plus at least two of three growth and innovation tests covering turnover growth, employment growth and qualifying research and development expenditure. All of these are proposals being consulted upon and may change before legislation is finalised.

Is my company large enough to qualify?

Many established small businesses will not meet the proposed company-scale and growth requirements, and it is important to be direct about that. A profitable company with £2 million of turnover and twelve employees is a solid business, but on the published proposals it would not qualify, however long its founder has owned it. Founding a company does not by itself establish eligibility, and owners should not assume the 10% rate will apply to their sale.

For most owners of established UK SMEs, Business Asset Disposal Relief or the ordinary Capital Gains Tax rules are likely to be more relevant. A specialist tax adviser can confirm which regime, if any, applies to a particular shareholding.

How much tax could Founders' Relief save?

The illustration below compares a qualifying £1 million gain taxed at the proposed 10% rate with the same gain taxed at an assumed 24% ordinary Capital Gains Tax rate.

This is a hypothetical illustration, not a prediction that any individual will qualify or of any actual liability. The £10 million lifetime limit is a ceiling on the gains that can attract the 10% rate across an individual's lifetime, not a description of anyone's sale proceeds, and the proposed limit would be reduced by Business Asset Disposal Relief and Investors' Relief claims made from 6 April 2027.

Does a founder have to sell the entire company?

Not necessarily. The proposals describe qualifying disposals of shares or securities, which can include selling only part of an existing holding, depending on the eventual legislation and the individual's circumstances. It is worth distinguishing the different things that happen in real transactions: a sale of existing shares to a buyer, the issue of new shares by the company to investors, retained equity that the founder keeps, rollover arrangements where value is taken in the acquirer's shares, and earn-outs where part of the price depends on future performance. Each can have a different tax treatment, and later disposals of retained shares would be separate events. No assurances can be given about the tax treatment of complex structures before the legislation is final — that is precisely the ground to cover with a specialist tax adviser before terms are agreed.

How does Founders' Relief differ from BADR?

The two reliefs serve different sellers. Business Asset Disposal Relief is the established regime for owners of trading businesses, including smaller companies, with an 18% rate and a lifetime limit falling to £500,000 from April 2027. Founders' Relief is the proposed 10% regime for founders and early investors in companies that meet demanding scale and growth tests, with a £10 million lifetime limit. The two preferential rates cannot apply to the same gain at the same time, and the proposed Founders' Relief limit would be reduced by BADR and Investors' Relief claims made from 6 April 2027.

The companion guide to Business Asset Disposal Relief covers the established regime in detail.

What should founders consider before a sale?

The tax rate is one line in a much larger decision. The commercial questions usually decide the outcome: what the business is worth in the market and to whom, which strategic trade buyers would value it most highly, what the shareholders want from the transaction beyond price, and when to go to market. Founders should also think early about retained roles and equity, deferred payments and earn-outs, how confidentiality will be maintained while buyers are researched, what due diligence will surface, and — before Heads of Terms are signed — specialist tax advice on the structure being proposed. Agreeing a transaction and completing it are different events, and value agreed early can move before completion if the preparation is weak.

Is EXITS.co.uk the appropriate adviser?

Honestly, it depends on the company. EXITS.co.uk generally works with owners of smaller established UK SMEs on confidential, sell-side sale mandates, and enquiries are considered individually. Founders of larger growth companies — particularly those likely to satisfy the proposed Founders' Relief scale tests — may require a different scale or structure of M&A engagement. An initial confidential discussion costs nothing and carries no obligation, and if a mandate would sit better elsewhere that will be said plainly.

Common questions about Founders' Relief

Does every business founder qualify?

No. The proposals combine a 25% founding shareholding, a five-tax-year holding period, UK residence conditions and demanding company-scale and growth tests. Many founders of successful smaller companies will not qualify, and should look to Business Asset Disposal Relief or the ordinary Capital Gains Tax rules instead.

Does the company need £10 million of turnover?

Under the published proposals, yes — annual turnover of at least £10 million in the accounting period ending in the year before disposal, alongside at least 15 qualifying full-time-equivalent employees and at least two of the three growth and innovation tests. These figures are part of the consultation and could change in the final legislation.

Can a founder retain shares after a sale?

The proposals contemplate qualifying disposals of shares, which can include a partial disposal of a holding, so retaining some equity is possible in principle. The treatment of the retained shares, any rollover into an acquirer's shares and any later disposal depends on the final legislation and the transaction structure, and needs specialist advice before terms are agreed.

This page is general information about the law and tax treatment of business sales in the United Kingdom as at 1 November 2026. It is not personal advice, and the treatment of any particular transaction depends on how the deal is structured, the shareholders' own circumstances, the status of the company, the legislation in force at completion and the interpretation of your own accountant and solicitor. Take advice on your own facts before acting.