For founders who have spent years building and growing a business, the tax position on exit can have a significant bearing on how much value ultimately passes into their hands. The Autumn Budget 2026 introduced a potentially significant new consideration.
Founders’ Relief is intended to provide a 10% Capital Gains Tax (CGT) rate on qualifying disposals of shares, up to a lifetime limit of £10 million of gains per individual. The Government intends the relief to apply to qualifying disposals made on or after 6 April 2027.
At first sight, the £10 million lifetime limit is eye-catching. However, the proposed qualifying conditions are highly targeted and are expected to restrict the relief to a relatively small group of founders and early investors. HMRC currently estimates that around 600 individuals across approximately 400 businesses will be eligible each year.
For most business owners, Founders’ Relief is therefore more likely to be a development to monitor rather than a mainstream exit-planning opportunity. The immediate priority should be to establish whether the relief could realistically apply before allowing it to influence transaction planning.
Who could qualify for Founders’ Relief?
Founders’ Relief is aimed at founders and significant early investors in high-growth, innovative UK companies, rather than business owners generally.
Under the current proposals, an individual would need to have:
- held at least 25% of the company’s ordinary share capital (together with corresponding voting rights and rights to distributable profits and assets on a winding up) when the relevant trading activity, or preparation for it, began;
- held the shares or securities for at least five tax years before disposal; and
- been UK resident under the Statutory Residence Test for at least five continuous tax years before disposal.
Those individual tests are only part of the picture. The company itself would also need to satisfy detailed conditions relating to its UK presence, trading activities, size, growth and innovation.
Under the current proposals, this includes having turnover of at least £10 million and at least 15 qualifying full-time equivalent employees in the accounting period prior to disposal. The company would also need to meet at least two of three specified tests relating to turnover growth, employee growth or qualifying R&D expenditure and claims.
Taken together, these conditions indicate that the relief is designed for a narrow group of high-growth businesses rather than the wider owner-managed business population. Being the founder of a successful company will not, on its own, be sufficient to qualify.
The detailed design is subject to a short period of consultation. Until the final conditions are known, founders should be cautious about building transaction plans around the potential availability of the relief.
How valuable could the £10 million lifetime limit be?
For an individual able to use the full £10 million lifetime limit, applying a 10% CGT rate rather than a 24% rate could represent a difference of up to £1.4 million in CGT.
However, this is a maximum theoretical illustration. The actual benefit will depend on whether the final conditions are met, the individual's circumstances and the nature and timing of the disposal.
Could Founders’ Relief affect the timing of a business sale?
For the relatively small group of founders who appear likely to satisfy the proposed conditions, a transaction completing around 6 April 2027 may warrant more detailed modelling. That does not mean an existing transaction should automatically be delayed.
Business valuation, buyer appetite, contractual commitments, funding conditions and the commercial risks of changing an agreed timetable all need to be considered. A stronger commercial deal completed earlier could still deliver a better overall outcome than delaying solely in the hope of securing a lower tax rate.
For most business owners, mainstream CGT, transaction and exit-planning considerations are likely to remain more immediately relevant than Founders’ Relief.
Where a founder does appear to fall within the targeted population, transaction timing should be reviewed with specialist advisers before an irrevocable decision is made.
How does Founders’ Relief fit with wider exit planning?
A business exit is rarely a single transaction to consider in isolation. Well before a prospective sale, founders may need to consider:
- the ownership and shareholding structure of the business;
- the likely business value, transaction timing and available CGT reliefs;
- the structure of the consideration, including upfront cash, deferred payments and shares or other interests in the acquiring business;
- exit readiness, management retention and preparation for buyer due diligence; and
- how the proceeds will support the founder’s longer-term personal, family and succession objectives.
These considerations are relevant whether or not Founders’ Relief ultimately applies. For example, deferred consideration and rollover shares can have important tax implications and should be considered as part of the overall transaction structure.
Founders’ Relief should therefore sit within a wider exit-planning exercise rather than becoming the reason for a transaction or determining its timetable.
For many business owners, existing CGT reliefs may be more relevant, creating a more mainstream reason for owners contemplating an exit to review their position. Such reliefs are subject to detailed conditions which are not outlined here but, in summary:
- Business Asset Disposal Relief (BADR) currently offers a CGT rate of 18% on qualifying disposals on a lifetime limit of £1 million of gains. However, the Budget confirmed that this limit will reduce from £1 million to £500,000 from April 2027.
- Investors’ Relief also offers a CGT rate of 18% on qualifying disposals of shares by an investor (not an officer or employee) in an unlisted company, up to a lifetime limit of £1 million of gains. This limit has not been reduced by the recent Budget.
From business value to personal wealth
Selling a business can fundamentally change an owner’s financial position. Before an exit, much of their wealth may be concentrated in the company. Afterwards, they may be managing significant personal capital for the first time.
Planning should therefore consider not only the tax payable on exit, but what the sale proceeds need to achieve. This could include providing long-term income, supporting children or grandchildren, inheritance tax and succession planning, future business or investment opportunities and charitable giving.
Considering these objectives before a transaction can help business owners establish how much capital they actually require and whether different exit outcomes support their longer-term plans.
How would you demonstrate eligibility?
For founders who may qualify, establishing eligibility will likely require more than checking the conditions immediately before a sale. Supporting evidence could span several years and cover matters such as ownership history, the founder's involvement and whether the company satisfies the relevant growth and innovation conditions.
The proposed claim process would require information to be provided through Self Assessment, and HMRC are likely to review whether the conditions were satisfied. Robust documentation and a clear audit trail will therefore be important.
Where eligibility is uncertain, founders should use advisers with first-hand experience of complex CGT reliefs, business transactions and HMRC engagement. A dedicated Founders’ Relief clearance process has not yet been confirmed.
We’re here to help
Founders’ Relief could be valuable for a targeted group of entrepreneurs, but its availability will depend on the final conditions and the evidence available to support a claim.
Our tax and corporate finance specialists can help assess potential eligibility, review transaction timing and structure, and consider the wider tax and commercial consequences of an exit. Where Founders’ Relief could realistically apply, our experienced specialists can also help establish the evidence needed to support the position and consider any appropriate engagement with HMRC.
Our wealth management specialists can help business owners consider what happens after the transaction, including how sale proceeds can support their long-term personal, family and succession objectives.
If you are considering selling, transferring or stepping back from your business, speak to us before relying on Founders’ Relief or changing an agreed transaction timetable.
