What is Founders’ Relief and Who Does it Benefit?

Founders’ Relief was a headline business tax announcement in the 2026 Autumn Budget.

A proposed 10% Capital Gains Tax (CGT) rate on qualifying disposals from 6 April 2027, with a £10 million lifetime limit, looked like a return to Entrepreneurs’ Relief in its more generous days.

But the finer details revealed strict qualifying conditions. For owner-managers who miss out, the promise could feel like being gifted an empty box of chocolates.

Meanwhile, the Budget announced a cut in the Business Asset Disposal Relief (BADR) lifetime limit from £1 million to £500,000 from 6 April 2027. This may be disappointing for those planning an exit who lose out under BADR and cannot qualify for Founders’ Relief.

The Founders’ Relief rules are not final and are due to be formalised in the 2026-27 Finance Bill. Here’s who could benefit.

Who qualifies for Founders’ Relief?

Despite the name, business founders do not automatically qualify for Founders’ Relief. There are some strict guidelines which narrow the scope of this relief significantly:

• You’ll need to have held at least 25% of the company’s ordinary share capital when the trade (or preparations for it) began.
• You must also have held your shares for at least five years and have been UK resident for five continuous tax years before disposal.
• Your business must have generated at least £10 million in turnover and employed at least 15 qualifying full-time employees in the accounting period before the disposal

From there, you need to pass two out of three of the following additional tests:

• sustained turnover growth of 25%;
• sustained employee growth of 25%; or
• at least £1.5 million of qualifying R&D expenditure.

These are significant hoops founders must jump through to qualify for Founders’ Relief. The reality is many owner-managed businesses will never qualify, despite it being an attractive option for those that do.

So who is Founders’ Relief really for?

Since Founders’ Relief is likely out of reach for most traditional small businesses and their owners, you may be wondering who it is actually for.

The Government describes it as a measure for founders and significant early investors in high-growth, innovative companies, intended to encourage those businesses to start, scale, and remain in the UK.

This makes it especially relevant for ambitious scale-ups on a steep growth trajectory, or those with a large headcount or qualifying R&D activity.

If this is a path your business is likely to take, understanding Founders’ Relief and planning appropriately will be important.

What should you do about Founders’ Relief?

If you are looking ahead to an eventual business sale, it is important to establish early whether or not Founders’ Relief is a realistic part of your exit strategy. Crucially, the rules are not final yet, with legislation not due to be formalised until the 2026-27 Finance Bill.

Founders' Relief FAQs

When does Founders’ Relief start?

The proposed relief will apply to qualifying disposals made on or after 6 April 2027. The detailed rules are currently subject to consultation, so some of the qualifying conditions could change before the legislation is finalised.

Is Founders’ Relief the same as Business Asset Disposal Relief (BADR)?

No. They are separate reliefs with different qualifying conditions. Founders’ Relief proposes a 10% CGT rate and £10 million lifetime limit, but has significantly more demanding eligibility requirements. The Government’s proposals also state that the £10 million Founders’ Relief limit will be reduced by amounts claimed under the BADR and Investors’ Relief lifetime limits from 6 April 2027.

Can any small business owner claim Founders’ Relief?

No. Simply starting or owning a business isn’t enough. Among the proposed requirements, the business must have generated at least £10 million turnover and employed at least 15 qualifying full-time employees in the accounting period before disposal. It must also satisfy at least two of the three growth and innovation tests.

Do I have to sell my entire company to claim Founders’ Relief?

Not necessarily. The consultation refers to qualifying disposals of shares or securities and states that the relief can apply to all shares disposed of by a qualifying individual, provided the relevant conditions are met. This means a qualifying disposal does not inherently have to represent the founder’s entire shareholding.