UK Founders' Relief: What the New 10% Capital Gains Tax Consultation Means for Entrepreneurs

Founders' Relief is a proposed 10% Capital Gains Tax (CGT) rate for founders who sell shares in a high-growth UK company. It would apply to up to £10 million of gains over your lifetime, for qualifying disposals on or after 6 April 2027. The rules aren't final yet. HM Treasury is consulting on them until 30 November 2026, and you can still have your say.

Could This Apply to Me?

Probably only if your company is already well established. The proposals are aimed at founders of companies with at least £10 million turnover and at least 15 full-time employees. So most early-stage companies wouldn't qualify yet.

The consultation is open to everyone, though. If you're a founder, adviser or part of an industry group, you can respond even if you wouldn't claim the relief yourself.

What Is Founders' Relief?

Founders' Relief is a new CGT relief announced at Budget 2026 for people who started or invested early in a UK company and helped it scale. It would reduce the CGT rate on qualifying share sales to 10%, up to a lifetime limit of £10 million of gains. The official term for a sale, or giving shares away, is a "disposal", and you'll see that word throughout.

The limit would apply per person, so more than one founder in the same company could claim. Only individuals can claim it, not companies.

The government says the aim is to encourage more high-growth, innovative companies to start, scale and stay in the UK. It's currently a proposal, so the final rules could change after the consultation.

When Would Founders' Relief Start?

The proposed start date is 6 April 2027. The relief would apply to qualifying disposals made on or after that date.

Here's the timeline so far:

The consultation period is shorter than usual. HM Treasury says that's because evidence was already gathered in the Tax Support for Entrepreneurs Call for Evidence.

Who Would Qualify for Founders' Relief?

You'd need to pass three sets of tests, covering you, the company and the company's growth. Miss any one and the relief wouldn't apply. These are the conditions as currently proposed.

What Are the Individual Conditions?

You'd have to hold a meaningful early stake for a long time, and be UK resident throughout. Under the proposals, you would need to:

• Have held 25% of the company's ordinary shares when its trade, or preparation for it, began. The shares would need matching voting rights and rights to profits and assets if the company is wound up
• Have held the shares or securities for at least five years before you dispose of them
• Have been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal

The relief wouldn't be limited to your original shares. It would apply to all the shares you dispose of, if you meet the conditions. The 25% test could also be met through the holding company of a trading group.

What Are the Company Conditions?

The company would need to be a UK-based trading company that has reached real scale. Under the proposals, it would need to:

• Be in scope of UK Corporation Tax, with 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 excluded activities. Excluded activities follow the Enterprise Investment Scheme list, such as dealing in land, financial services or property development
• Still be carrying on the new trade it was set up for, with no major change in its nature
• Have turnover of at least £10 million in the accounting period before disposal
• Have at least 15 qualifying full-time employees in that accounting period

A qualifying employee works at least 35 hours a week and is paid at least the National Minimum Wage. Directors, contract workers and agency workers wouldn't count.

What Are the Growth and Innovation Conditions?

The company would need to pass at least two of three tests. This is how the proposals measure sustained growth:

Needing two of the three means a company that doesn't claim R&D relief could still qualify through turnover and headcount.

How Does Founders' Relief Compare With Business Asset Disposal Relief?

Founders' Relief is designed for a much smaller group of fast-growing companies, but it offers a lower rate and a much higher limit. Here's how the headline terms compare with Business Asset Disposal Relief:

The £10 million Founders' Relief limit would be reduced by amounts you've claimed under the BADR and Investors' Relief limits from 6 April 2027. So you can't simply stack the reliefs on top of each other. The Budget reported BADR changes separately, so check GOV.UK for the current BADR rules.

For a sense of scale, take a founder with a £10 million gain who pays CGT at 24%, the rate for higher and additional rate taxpayers. That would be £2.4 million of CGT, against £1 million at 10%. This is a simple illustration that assumes every condition is met. It isn't a prediction of any real tax bill.

How Would You Claim Founders' Relief?

You'd claim it in your Self Assessment return for the tax year of the disposal. HMRC would prescribe the information needed, including the periods you rely on for each condition. The government is also considering a standard form to attach to the return.

HMRC would treat a claim as "unsatisfactory" if the required information wasn't provided. Some of the evidence sits with the company, and it can reach back across up to ten years. So the government's preferred approach is a statutory right for individuals to request that information from the company, which would have to supply it within a set period.

There's also a compliance risk to know about. HMRC could later challenge the company's R&D tax relief claim. If a condition you relied on then fails, you could lose the relief and owe the extra tax, plus interest. The government also says it will consider targeted anti-avoidance rules, for example for restructuring done to bring assets into scope.

How Can I Respond to the Founders' Relief Consultation?

Send a written submission to EnterpriseTax@hmtreasury.gov.uk before the consultation closes on 30 November 2026. HM Treasury asks for responses as early as possible, and says it will also hold stakeholder meetings during the consultation.

The consultation asks seven questions. They cover whether:

• The individual conditions identify founders effectively
• The company conditions focus on companies that have reached scale
• There are practical difficulties or unintended consequences
• The three growth tests work, and whether there's a better measure of innovation than R&D
• The right to request information from a company is workable
• There are avoidance or administrative risks, and how to address them

You can read the full document on GOV.UK. Responses from founders, advisers and industry groups can all be useful, particularly where you can give real examples of how the conditions would work in practice.

What Does This Mean for Exit Planning?

It's too early to plan around the relief, but it's worth knowing the conditions now. Several depend on decisions made years before a sale. Examples are the five-year holding period, the 25% stake at the start, and growth measured over up to ten years.

The proposals are subject to change. Anyone thinking about selling shares should speak to a qualified tax adviser, as the right answer depends on individual circumstances. A good first step is to check who holds what share of the company, and whether your records show it from the start. Our guide on the difference between a director and a shareholder covers the basics. If you already have co-founders or investors, a shareholders agreement can help set out who holds what, and our guide to the J30 stock transfer form explains the paperwork when shares change hands.

FAQs

What is Founders' Relief in the UK?

It's a proposed 10% Capital Gains Tax rate on qualifying share sales by founders and significant early investors in high-growth UK companies. The limit is £10 million of gains per person over their lifetime.

When does Founders' Relief start?

It's proposed to apply to qualifying disposals made on or after 6 April 2027, with legislation planned in Finance Bill 2026/27. The rules aren't final until legislation passes.

Do I need to own 25% of the company to qualify?

Under the current proposals, yes. You would need to have held 25% of the ordinary shares when the company's trade, or preparation for it, began. This could be met through a trading group's holding company.

How is Founders' Relief different from Business Asset Disposal Relief?

Founders' Relief proposes a 10% rate and a £10 million lifetime limit for scaled-up companies. BADR is 18% from 6 April 2026, with a lifetime limit reported as £500,000. Any Founders' Relief limit would be reduced by amounts claimed under BADR and Investors' Relief.

How do I respond to the Founders' Relief consultation?

Email EnterpriseTax@hmtreasury.gov.uk before the consultation closes on 30 November 2026.

This article is for general information only and does not constitute legal, tax or financial advice. Founders' Relief is a proposal, and the rules, rates and dates may change before legislation is passed. Please check GOV.UK or speak to a qualified tax adviser before making decisions.