The announcement of a new CGT relief in the 2026 UK Autumn Budget was an unexpected surprise which could save a taxpayer up to £1.4 million in CGT on any disposal of their shares after 6 April 2027. Its stated aim is to reward people who started, or backed, a UK company early and grew it into a substantial, innovative business.
Our experts have outlined the key questions to understanding the proposed Founders’ Relief: what it is, could the relief apply to you, and what you can do now to be prepared.
In summary:
- What it is: A special 10% CGT rate on up to £10 million of lifetime gains when you sell shares in a qualifying company.
- Who it applies to: Individual taxpayers who held at least 25% of a UK trading company when its trade started; have held their shares for no less than 5 years and have been UK tax resident for no less than 5 tax years prior to their disposal.
- What are the company requirements: Companies carrying on a qualifying trade with at least £10 million turnover and 15 full-time employees in the accounting period prior to disposal, which can show strong, continuous growth over 3 consecutive accounting periods within 10 years prior to disposal and/or significant R&D expenditure in an accounting period(s) within 3 years before disposal.
- When it applies from: For disposals on or after 6 April 2027.
Draft legislation has not yet been published as the Government is currently consulting on this new relief. The commentary in this article is based on the consultation document published by the Government on 28 October 2026.
1. How does Founders' Relief work?
- Where Founders' Relief applies, the CGT rate of 10% applies on up to £10 million of lifetime gains (as opposed to the current 24% for higher-rate taxpayers and 18% where you can claim Business Asset Disposal Relief on your gain (BADR)).
- The £10 million lifetime limit is per person - Several founders in the same company can each claim but the limit is reduced by gains you claim under BADR or Investors' Relief from 6 April 2027.
The maximum potential saving is therefore £1.4 million when compared to the main rate of 24%.
2. Do I qualify as a “founder” under Founders’ Relief?
To be a "founder" for these purposes you must meet all the following tests:
- The 25% test: You must have held in your own name (not via a trust or holding company) at least 25% of the ordinary shares when the company's trade, or preparation for it, started. That 25% must carry matching votes and rights to profits and to assets on a winding up.
- The 5-year holding test: You must have held the shares for at least five years before you sell.
- The UK residence test: You must have been UK tax resident for at least five continuous tax years before the sale.
3. Will my company qualify for Founders’ Relief?
A company will only qualify if it is a UK trading company, that is UK tax resident; and where it has shown sustained growth and/or significant Research and Development (R&D) expenditure.
In the accounting period before the disposal, the company must have:
- a turnover of at least £10 million; and
- at least 15 qualifying full-time employees (being staff working at least 35 hours a week and paid at least the National Minimum Wage), who are not directors or contract/agency workers.
In addition there are certain growth and innovation conditions (see below).
The relief only applies to:
- Trading companies (or holding companies of a trading group) within the scope of UK corporation tax and having a “substantial UK presence” for the five accounting periods before the sale; and
- Companies not carrying out, to any substantial extent, “excluded activities”, which are expected to include financial services, property development, energy generation and leasing or licensing.
4. What are the growth and innovation conditions for Founders’ Relief?
The company will need to meet at least two of the three following tests:
- Turnover test: Turnover compound growth of 25% a year over three consecutive accounting periods within the 10 years before the sale, starting from at least £10 million (in practice, this means a minimum growing turnover from £10 million to c.£20 million).
- Headcount test: Average compound growth of 25% a year in full-time employees over three consecutive accounting periods within the same 10 years, starting from at least 15 (in practice, a minimum growth from 15 to 30 employees).
- Innovation test: At least £1.5 million of qualifying R&D expenditure, with R&D tax relief claimed for accounting periods ending within the three years before the sale.
Therefore, if your company grew fast and then matured, it can still qualify, provided it can evidence sufficient historic growth as well as meeting the conditions in the accounting period prior to sale.
5. What can I do now to get ready for Founders’ Relief?
Consider whether you meet the individual conditions immediately – if you do not and the trade has already commenced then the relief is unlikely to be available to you.
Consider the company conditions alongside the growth and innovation conditions – are you on track for the sustained growth required? If any of your employees are not full time, they will not count as “one” employee for these purposes. If you, as a founder, are only a director of the company you will not count towards the employee number.
If you are selling within the next 12 months:
- Model both sides of 6 April 2027. If you qualify for Founders' Relief, waiting until after that date could cut your CGT bill significantly. If you do not qualify, selling before that date keeps access to the current £1 million BADR limit, before it reduces to £500,000.
- Check the deal timetable. When completion happens, and whether there is an unconditional contract before 6 April 2027, could decide whether the relief is available to you.
- Review earn-outs and deferred consideration to make sure the structure does not leave part of the price outside the relief.
If you are running a growth company:
- Track turnover, full-time headcount and R&D spending for each accounting period (going back up to 10 years), to make sure the conditions are satisfied. Beware if you have altered accounting periods (either to extend or shorten them).
- Make sure R&D claims are well documented and defensible.
- Take advice before any group reorganisation, share-for-share exchange or imposition of a new holding company. These changes may affect the conditions or trigger the anti-avoidance rules.
If you are starting a new business:
- Ensure you do not inadvertently prevent access to the relief by making sure each intended founder holds at least 25% when trading or preparation begins, holding the share personally (not via a company or trust) and keep careful records from day one.
6. What happens next with the progress of Founders’ Relief?
The relief is under consultation until 30 November 2026, and the relief is due to take effect for sales from 6 April 2027. The details (including the conditions) can still change. We would expect legislation to follow in early 2027.
The consultation asks whether the conditions identify true founders and whether the tests are workable. It also asks about other ways to measure innovation. If your business looks likely to fall just outside the tests, now is the time to say so.
Do not assume the above reflects how the relief will be implemented. Keep your options open until the legislation is published and revisit any plans when it is.
