Proposed Tax Relief
Founders' Relief 2027: Could Your Business and Shareholding Qualify?
Founders' Relief was announced at Budget 2026 for founders and significant early investors in qualifying high-growth, innovative UK companies. The current proposal is a 10% CGT rate on up to £10 million of qualifying lifetime gains per individual, applying to qualifying disposals on or after 6 April 2027. It is not yet final law: the detailed conditions remain subject to consultation and legislation, and the technical consultation closes on 30 November 2026.
Founders' Relief is a narrow proposed relief.
It should not be treated as available to every company founder or every retiring business owner. The conditions below are the Government's current proposals and may change before any legislation is passed.
The proposed conditions in three parts
Proposed individual conditions
The current proposal includes requirements such as:
- Holding at least 25% of the company's ordinary share capital when the relevant trade, or preparation for it, commenced.
- Holding the relevant shares or securities for at least five tax years before the disposal.
- Being UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.
The precise rights, securities and economic-entitlement provisions must be checked against the final legislation.
Proposed company conditions
The company would also need to satisfy demanding conditions, including:
- Being within the scope of UK Corporation Tax.
- Maintaining a substantial UK presence.
- Being a qualifying trading company, or the holding company of a qualifying trading group.
- Avoiding substantial non-trading or excluded activities.
- Continuing the trade for which it was established, without a major change in its nature.
- Turnover of at least £10 million in the relevant accounting period.
- At least 15 qualifying full-time-equivalent employees in the relevant accounting period.
These are proposed conditions, not final law.
Proposed growth and innovation conditions
The company must currently meet at least two of three proposed tests:
- Turnover growth.
- Employee growth.
- Qualifying research and development expenditure.
The proposed thresholds for each test are described in the HM Treasury technical consultation. Because the consultation remains open, the thresholds should be verified against the latest HM Treasury material immediately before any reliance is placed on them.
Excluded activities
Founders' Relief is not intended to apply universally. Government material identifies excluded activities including dealing in land, certain financial services and property development. This is not an exhaustive list, and the final legislation may go further. Actual activities, contracts and ownership arrangements matter: a construction contractor is not automatically a property developer, and borderline cases require professional review.
BADR versus Founders' Relief
| BADR | Proposed Founders' Relief | |
|---|---|---|
| Preferential CGT rate | 18% | 10% |
| Lifetime limit from 6 April 2027 | £500,000 | £10 million |
| Breadth | Wider qualifying business-disposal relief | Narrow founder and early-investor relief |
| Holding period | Normally two years | Proposed five tax years |
| Founding stake | BADR personal-company tests | Proposed substantial stake at commencement |
| Company size tests | No equivalent £10m turnover requirement | Proposed turnover and employee thresholds |
| Growth tests | No equivalent high-growth test | At least two proposed tests |
| Status | Existing relief with an announced limit change | Proposed relief subject to final legislation |
Founders' Relief is not a replacement for BADR. Its proposed eligibility requirements are fundamentally different. Under the current proposal, BADR and Investors' Relief claims made from 6 April 2027 are proposed to reduce the available Founders' Relief lifetime headroom. Read more about the existing relief in our Business Asset Disposal Relief guide.
Founders' Relief and exit planning
If the relief becomes law in something like its proposed form, it could become relevant to full share sales, partial secondary share sales, majority sales with retained equity, phased exits, rollover equity, deferred consideration, earn-outs, second-stage exits and new investment into the company. Three structures are worth separating clearly:
- Selling existing shares, where the proceeds go to the selling shareholders.
- Issuing new shares, where the investment normally goes into the company, not to you.
- Retaining shares, which remain exposed to future value and risk.
This page does not provide tax structuring advice. A well-run exit treats these as two separate professional workstreams: commercial valuation and transaction advice on one side, and qualified tax advice on the other. Our retirement, exit and succession planning guide covers the commercial side.
Founders' Relief Readiness Check
Compare your circumstances with the Government's current proposed conditions. This is an initial information tool, not a tax eligibility decision, and your headline result appears on screen before any contact details are requested.
Official sources
The material claims on this page are drawn from primary Government sources:
- HM Treasury: Budget 2026 and the Budget 2026 Overview of Tax Legislation and Rates.
- HM Treasury: Founders' Relief technical consultation (closes 30 November 2026).
- HM Revenue & Customs: Founders' Relief policy paper.
- HMRC: Business Asset Disposal Relief guidance, for the comparison with the existing relief.
Tax information on this page was checked against HMRC and HM Treasury material on 1 November 2026. Founders' Relief is a proposal subject to consultation and legislation; nothing on this page is personal tax advice, and the content will be reviewed when the consultation outcome, draft or final legislation, Royal Assent, material HMRC guidance changes, or the proposed 6 April 2027 commencement date arrive.
Published by BusinessValuation.co.uk. Last reviewed 1 November 2026. BusinessValuation.co.uk is not a tax adviser, accountancy practice or law firm, and this page is general information, not personal tax advice.
Founders' Relief FAQ
Direct answers about the proposed relief, its status and how it compares with BADR.
Is Founders' Relief law?
No. Founders' Relief was announced at Budget 2026 as a proposal. The detailed conditions remain subject to a technical consultation, which closes on 30 November 2026, and to legislation. It is proposed to apply to qualifying disposals on or after 6 April 2027, but nothing is final until the legislation is passed.
Who may qualify for Founders' Relief?
Under the current proposal, the relief is aimed at founders and significant early investors in qualifying high-growth, innovative UK companies. Proposed individual conditions include holding at least 25% of the ordinary share capital when the trade began, holding the shares for at least five tax years, and five continuous tax years of UK residence. The company must also meet proposed trading, turnover, employee, UK presence and growth tests. It is a narrow relief, not one available to every company founder.
Can Founders' Relief apply to a partial sale?
The proposal is framed around qualifying disposals of shares or securities, which could include partial secondary sales, majority sales with retained equity and phased exits. The detailed treatment of partial disposals, rollover equity, deferred consideration and earn-outs must be checked against the final legislation and with a qualified tax adviser.
What is the difference between BADR and Founders' Relief?
BADR is an existing, wider business-disposal relief taxing qualifying gains at 18% within a lifetime limit that is announced to fall to £500,000 from 6 April 2027. Founders' Relief is a narrow proposed relief for founders and early investors in high-growth companies, with a proposed 10% rate and £10 million lifetime limit, plus company size and growth tests that BADR does not have. Founders' Relief is not a replacement for BADR.
Do BADR or Investors' Relief claims affect Founders' Relief?
Under the current proposal, BADR and Investors' Relief claims made from 6 April 2027 are proposed to reduce the available Founders' Relief lifetime headroom. The precise interaction must be confirmed against the final legislation.
Should I delay or bring forward a sale because of Founders' Relief?
No decision should rest on a relief that is not yet law. The proposal may change during consultation and legislation, and commercial readiness, buyer demand and deal terms usually matter more than a proposed tax rate. Take qualified tax advice before letting any tax proposal set your timetable.
Value first. Tax structure second.
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