What is the new Founders' Relief, and will it apply when I sell my company?

Founders' Relief is a new 10% rate of capital gains tax on up to £10 million of lifetime gains, for qualifying sales from 6 April 2027 by founders and significant early investors in high-growth UK companies. As proposed in a consultation open until 30 November 2026, it is for companies with at least £10 million of turnover and 15 full-time staff that pass two of three growth and R&D tests, and for sellers who held at least 25% when the trade began; a business below those levels would not qualify, and Business Asset Disposal Relief, 18% on up to £500,000 of lifetime gains, remains the relief on its sale where it qualifies.

Budget 2026: Founders' Relief on Selling Up

Who it is for

Founders, and significant early investors, of UK companies that have grown large and fast: as proposed, at least £10 million of turnover and 15 full-time employees in the year before the sale, and passing two of three tests on growth and research and development. An owner-managed business below those levels would not qualify; for its owner, Business Asset Disposal Relief (BADR) remains the relief on a sale, at 18% on up to £500,000 of lifetime gains from 6 April 2027, where its conditions are met.

What was announced

These parts are in the Budget documents as decided:

The rate: 10% capital gains tax on qualifying disposals.
The limit: up to £10 million of lifetime gains. Any BADR or Investors' Relief claimed from 6 April 2027 reduces the £10 million. The consultation says the limit applies per individual, so more than one person could claim on the same company.
The start: qualifying disposals of shares or securities on or after 6 April 2027.

What is still a proposal

Who qualifies is set out in a technical consultation that closes on 30 November 2026. The government will then legislate through amendments to Finance Bill 2026-27. Until then, these conditions are proposals, not law.

The individual would need to have:

held at least 25% of the company's ordinary shares (with the matching votes and rights to profits and assets) when the trade it was formed for began, or when preparation for that trade began; this can be met through the holding company of a trading group, and the relief would cover all the shares the individual sells, not only the original holding;
held the shares for at least five years before the sale;
been UK resident for at least five continuous tax years before the sale.

The company would need to:

be within UK corporation tax, with a substantial UK presence for the five accounting periods before the sale;
be a trading company (or the holding company of a trading group), without substantial non-trading activity or the trades excluded from the Enterprise Investment Scheme, such as dealing in land, financial services or property development;
still carry on the trade it was set up for, with no major change in its nature;
have had turnover of at least £10 million, and at least 15 qualifying full-time employees, in the accounting period before the sale (an employee works at least 35 hours a week at no less than the National Minimum Wage; directors, contract and agency workers do not count).

It would also need to pass two of three tests:

Turnover: average growth of 25% a year over three consecutive accounting periods within the ten years before the sale, from at least £10 million in the period before the first of them.
Headcount: the same 25% average growth in full-time equivalent employees, from at least 15 in the period before the first of them.
Innovation: at least £1.5 million of research and development spending that met the conditions for R&D tax relief, claimed for accounting periods ending within the three years before the sale.

Claims would be made in the individual's Self Assessment return for the tax year of the sale, possibly with a standard form, and the individual would have a right to ask the company for the information needed. If a condition later turned out not to be met (for example after HMRC challenged the company's R&D claim), the relief would be lost and the tax due with interest. Anti-avoidance rules are being considered.

A worked example

Every figure about the founder and the company is an illustration, chosen to meet each proposed condition; none comes from the Budget documents. The founder has held 40% of a UK trading company since it began trading eight years ago, and has been UK resident throughout. The company has kept the same trade and its UK base. Its turnover was £10.5 million four accounting periods ago and £21 million in the last one, average growth of about 26% a year over the three periods since, so it passes the turnover test. It employs 80 full-time staff, and has claimed R&D relief on £2 million of research and development in the last three years, so it passes the innovation test too.

The founder sells the whole 40% for £8 million in 2027/28. The shares cost next to nothing, so the gain is £8 million. They have never claimed BADR and make no other gains in the year. Each line uses the £3,000 annual exempt amount.

Sale of the 40% stake for £8 million in 2027/28	Capital gains tax	Kept from the £8 million
Before the Budget: BADR at 18% on £1,000,000, then £6,997,000 at 24%	£1,859,280.00	£6,140,720.00
After the Budget, without Founders' Relief: BADR at 18% on £500,000, then £7,497,000 at 24%	£1,889,280.00	£6,110,720.00
After the Budget, with Founders' Relief as proposed: £7,997,000 at 10%	£799,700.00	£7,200,300.00

As proposed, Founders' Relief would cut the tax on this sale by £1,089,580 against BADR and 24%. The documents do not yet say how a claim would choose between the two reliefs on one sale; this line puts the whole gain under Founders' Relief.

The £10 million limit is net of any BADR used from 6 April 2027. This founder has used none, so the £8 million sits within it and leaves £2 million of the limit. Had they claimed BADR on £500,000 of gains on an earlier sale since 6 April 2027, the limit would be £9.5 million, which would still cover this sale.

When it takes effect

For qualifying disposals made on or after 6 April 2027, the same date the BADR lifetime limit falls to £500,000. The conditions are settled only when the government legislates after the consultation closes on 30 November 2026.

Who it doesn't affect

As proposed, a sale does not qualify if any of these apply:

the company had turnover under £10 million, or fewer than 15 qualifying full-time employees, in the accounting period before the sale;
it passes fewer than two of the growth and innovation tests;
the seller held less than 25% when the trade began, or has held the shares for under five years.

That covers the £3 million sale on the selling your business page unless its company meets the same size and growth tests; that page does not give its turnover or staff numbers. A sale that does not qualify can still get BADR at 18% on up to £500,000 of lifetime gains from 6 April 2027, where its own conditions are met. As proposed, only individuals can claim. Founders' Relief does not apply to a sale made before 6 April 2027.

Where this comes from

Every figure on this page comes from the Budget documents published on GOV.UK on 28 October 2026, and was checked by Alan Davidson FCA. Last updated 28 October 2026. It is general information, not advice on your own position.