Founders' Relief Explained: 10% Capital Gains Tax on Up to £10m, and BADR Limit Halved to £500,000 from April 2027
The Autumn Budget on 28 October 2026 created Founders' Relief, a 10% Capital Gains Tax rate on up to £10 million of lifetime gains for founders of high-growth companies, while the Business Asset Disposal Relief limit falls from £1 million to £500,000 from 6 April 2027.
By Entrepreneur Group · Published
The Autumn Budget on 28 October 2026 introduced Founders' Relief, a 10% rate of Capital Gains Tax (CGT) on up to £10 million of lifetime gains for founders and early investors in high-growth UK companies. It applies to qualifying share sales from 6 April 2027. On the same date, the lifetime limit for Business Asset Disposal Relief (BADR) halves from £1 million to £500,000.
For most founders the two changes pull in different directions. A small number of fast-growing companies gain a much larger relief, while many owner-managers selling smaller businesses will have less of their gain covered by BADR.
What Founders' Relief offers
HMRC's policy paper on the new relief says gains on shares that do not qualify for another business relief are currently taxed at 18% or 24%. Founders' Relief will apply a 10% rate to qualifying disposals, up to a £10 million lifetime limit per person. Listed and unlisted companies can both qualify.
The conditions are strict. The individual must have:
- held at least 25% of the company's ordinary share capital when its trade began, or when preparations for it started;
- held the shares for at least five tax years before the sale;
- been UK resident for at least five continuous tax years before the sale.
The company must be a trading company within the scope of UK Corporation Tax, with a substantial UK presence over the five accounting periods before the sale, still carrying on the trade it was set up for. In the accounting period ending the year before the sale it needs turnover of at least £10 million and at least 15 qualifying full-time equivalent employees. It must also pass two of three tests: 25% average annual compound growth in turnover over three consecutive accounting periods, 25% average annual compound growth in employees over three consecutive periods, or qualifying R&D spending of at least £1.5 million in a recent period. Sectors excluded from the Enterprise Investment Scheme, such as land, financial services and property development, do not qualify.
HMRC expects about 600 people a year to be eligible, linked to about 400 businesses a year. The relief is forecast to cost £260 million in 2027-28, rising to £300 million in 2031-32. A technical consultation on the design runs until 30 November 2026, so the details may change.
The BADR cut
The Overview of Tax Legislation and Rates confirms the BADR lifetime limit falls "from £1,000,000 to £500,000 for BADR qualifying disposals made on or after 6 April 2027". Transitional rules cover certain contracts signed before that date but completed later, and some share reorganisations. City AM reports that the current BADR rate is 18%, with gains above the limit taxed at the main CGT rates, and that the Chancellor, John Healey, said the change would mean no changes for three in four claimants.
BADR and Investors' Relief claims made from 6 April 2027 count against the £10 million Founders' Relief lifetime limit.
Smaller changes to investment schemes
The Budget also tidies up the venture capital schemes. From 6 April 2027, a company that goes over its annual or lifetime EIS investment limit will no longer lose all relief: relief will be apportioned to the part within the limit. SEIS and EIS shares, or SEIS shares and a VCT investment, can be issued on the same day, and one investor paying late will not by itself remove relief for others in the same share issue.
What this means for founders
This section is editorial guidance, not tax or legal advice.
- Check whether you could ever qualify. Founders' Relief rewards a large founding stake held for five years in a company with £10 million turnover and fast growth. Most small businesses will rely on BADR instead.
- Plan around 6 April 2027. Both changes start then. Do not rush a sale to beat the date without professional advice, since transitional rules and deal terms matter.
- Keep records now. Shareholdings at formation, headcount and turnover by period, and R&D claims may all be needed to prove eligibility.
- Respond to the consultation. If the tests would exclude your company for reasons you think are unfair, the consultation closes on 30 November 2026.
Frequently asked questions
What is Founders' Relief?
Founders' Relief is a new Capital Gains Tax relief announced in the Autumn Budget 2026. It applies a 10% rate on up to £10 million of lifetime gains from qualifying share sales on or after 6 April 2027.
Who qualifies for Founders' Relief?
You must have held at least 25% of the company's ordinary shares from the start of trading, held them for five tax years and been UK resident for five years. The company needs at least £10 million turnover, 15 full-time equivalent staff and to pass two of three growth or R&D tests.
What is the new Business Asset Disposal Relief limit?
The BADR lifetime limit falls from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027.
Sources
- HMRC: Capital Gains Tax: introduction of a new Founders' Relief (28 October 2026) (reviewed 29 October 2026)
- HMRC: Budget 2026 overview of tax legislation and rates (OOTLAR) (reviewed 29 October 2026)
- HMRC: Changes to venture capital schemes (28 October 2026) (reviewed 29 October 2026)
- City AM: Budget 2026: Healey reduces threshold for Business Asset Disposal Relief (28 October 2026) (reviewed 29 October 2026)