Founders’ Relief 2026: What Is It and Who Qualifies?

The government has announced a new Capital Gains Tax (CGT) relief designed to reward entrepreneurs and early investors who have helped build successful, high-growth businesses in the UK.

Founders’ Relief, announced in Budget 2026, will offer a reduced 10% Capital Gains Tax rate on qualifying gains of up to £10 million per individual, applying to eligible business disposals from 6 April 2027.

The relief aims to encourage entrepreneurs to start, grow and retain innovative businesses in the UK. But who will qualify, and how does it compare to the existing Business Asset Disposal Relief (BADR)?

Who qualifies for Founders’ Relief?

Under the government’s proposed qualifying conditions, individuals must:

• Have held at least 25% of the company when trading activities began, including the corresponding voting and economic rights.
• Have owned their shares for at least five years before selling.
• Have been UK tax resident for at least five consecutive tax years before the disposal.

The business must also meet specific criteria, including:

• Being a qualifying UK trading company with a substantial UK presence.
• Generating at least £10 million in annual turnover in the accounting period before disposal.
• Employing at least 15 qualifying full-time employees in the accounting period before disposal.

Growth and innovation requirements

To qualify, the company must also meet at least two of the following three tests:

1. Turnover growth: Average annual compound growth of at least 25% over three consecutive accounting periods within the previous ten years, starting from turnover of at least £10 million.
2. Employee growth: Average annual compound growth of at least 25% in qualifying full-time equivalent employees over three consecutive accounting periods within the previous ten years, starting from at least 15 employees.
3. Innovation: At least £1.5 million in qualifying research and development (R&D) expenditure, with R&D tax relief claimed for that expenditure within the specified three-year period.

These requirements mean that Founders’ Relief will be targeted towards entrepreneurs who have successfully scaled their businesses and demonstrated sustained growth or innovation.

Changes to Business Asset Disposal Relief from April 2027

As part of Budget 2026, the government also announced that the lifetime limit for Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief, will be reduced from £1 million to £500,000 from 6 April 2027.

The Capital Gains Tax rate for BADR will remain at 18%.

In comparison, the proposed Founders’ Relief will offer a reduced 10% CGT rate on qualifying gains of up to £10 million, making it potentially much more valuable for entrepreneurs who meet the stricter eligibility requirements.

How does Founders’ Relief compare to Business Asset Disposal Relief (BADR)?

While both reliefs are designed to reduce the Capital Gains Tax payable when selling a business, there are some significant differences.

	Founders’ Relief (proposed)	BADR (from April 2027)
Capital Gains Tax rate	10%	18%
Lifetime gains limit	£10 million	£500,000
Minimum shareholding	25% when trading commenced	Generally 5%
Minimum ownership period	5 years	2 years
Growth requirements	Strict growth and innovation tests	No equivalent growth tests

While BADR remains available to a wider range of business owners, Founders’ Relief is specifically designed to reward those who have established and scaled high-growth, innovative UK businesses.

It’s also important to note that the proposed £10 million Founders’ Relief lifetime limit will be reduced by gains claimed under BADR and Investors’ Relief from 6 April 2027.

What does this mean for business owners?

Founders’ Relief could offer significant tax savings for entrepreneurs planning to sell their businesses, particularly those who have successfully scaled their companies.

However, the qualifying conditions are strict, and not every business owner will be eligible.

The detailed eligibility rules are currently subject to a government technical consultation and may change before implementation.

For founders considering an exit, understanding which reliefs may be available and planning ahead could make a substantial difference to their final tax liability.

Planning your business exit?

Whether you’re considering selling your business in the near future or developing a longer-term exit strategy, understanding the potential tax implications is an important part of the process.

At Langricks Chartered Accountants, working alongside our specialist corporate advisory team at Navig8 Advisory, we can help you understand your potential tax position, assess your eligibility for available reliefs and plan for a successful business exit.

Get in touch with our team to discuss your options.

This article is based on the HM Treasury and HMRC technical consultation, “CGT Founders’ Relief” (October 2026), and the Budget 2026 announcements. The proposed rules may change before legislation is finalised. This information is for general guidance only and does not constitute tax advice. Please speak to our team about your individual circumstances before taking any action.