Founders who meet a 25% stake and five-year holding test will pay a 10% rate of capital gains tax (CGT) on up to £10m of gains from 6 April 2027, against 18% or 24% now.
The Treasury said the relief, called Founders’ Relief, will apply to disposals of shares on or after that date. Gains on shares that do not qualify for other business reliefs are currently taxed at 18% or 24%, depending on an individual’s circumstances.
The Treasury also said the lifetime limit on Business Asset Disposal Relief (BADR), which taxes qualifying business gains at 18%, will fall from £1m to £500,000 for disposals from the same day.
It said the BADR change is meant to ensure that three-quarters of claimants still receive relief on their entire gain, while supporting the “start-up and scale-up phases of businesses, when most investment decisions are taken”.
About 13,000 of roughly 51,000 BADR claimants are expected to be affected, because some gains that previously qualified will no longer do so.
An individual must have held 25% of the company’s ordinary share capital when its trading activity, or preparation for that trade, began, according to the tax information and impact note.
The shares must have been held for at least five tax years before disposal, and the individual must have been UK resident for at least five continuous tax years.
The company must also have a substantial UK presence for the five accounting periods before disposal and be a trading company, or the holding company of a trading group.
For a subsequent disposal it must have had turnover of at least £10m and at least 15 qualifying full-time equivalent employees in the accounting period ending in the year before disposal.
It must also have met two of three growth and innovation tests within the 10 years before disposal. Two are annual average compound growth of 25% in turnover or in staff across three consecutive accounting periods.
The third is at least £1.5m of qualifying research and development spending, with tax relief claimed on it, in the three years before disposal.
Sectors excluded from the Enterprise Investment Scheme, including land dealing, financial services and property development, will not qualify. Companies may be listed or unlisted.
The £10m limit will be reduced by any BADR and Investors Relief claims made from 6 April 2027. The Treasury estimates about 600 individuals a year will be eligible, across about 400 businesses.
The Treasury put the net effect of the two measures on the public finances as follows, in £m, with the figures certified by the Office for Budget Responsibility.
| Tax year | Founders’ Relief | BADR change |
|---|---|---|
| 2026 to 2027 | none | +5 |
| 2027 to 2028 | -260 | +60 |
| 2028 to 2029 | -180 | +180 |
| 2029 to 2030 | -260 | +255 |
| 2030 to 2031 | -285 | +280 |
| 2031 to 2032 | -300 | +305 |
The Treasury said HMRC’s processes and IT systems will need changes for the founders’ measure, and that the full impacts are still being assessed.
A technical consultation on how the individual, company and growth conditions will work in practice opened on 28 October and closes on 30 November 2026.
The government said it will use responses to finalise the design, with legislation to follow in the Finance Bill 2026/27.
