Founders’ Relief 2026: eligibility and partial business sales

What is Founders’ Relief?

Founders’ Relief is a proposed Capital Gains Tax relief announced at the Budget on 28 October 2026. It would tax qualifying gains at 10%, up to £10 million of lifetime qualifying gains per individual, for qualifying disposals of shares or securities on or after 6 April 2027.

The limit is measured in gains. It is not a valuation cap, a deal-size test or a limit on sale proceeds. The proposed individual, company and growth conditions are demanding. A profitable business and a long-established owner do not necessarily qualify.

For an owner considering a partial exit, the commercial question comes first: how much capital do you want to release, how involved do you want to remain, and what would a partner need to contribute?

Who might qualify? The proposed checklist

This is a summary of HM Treasury’s consultation, not a certified assessment. Every core condition would need to be met, together with at least two of the three growth and innovation tests. The final legislation may differ.

At least two of these three additional tests

1. Turnover growth: average compound growth of 25% a year over three consecutive accounting periods within the ten years before disposal, with turnover of at least £10m in the accounting period before that sequence.
2. Employee growth: average compound growth of at least 25% a year in qualifying full-time equivalent employees over three consecutive accounting periods within that ten-year window, with at least 15 full-time employees in the preceding period.
3. Innovation: at least £1.5m qualifying R&D expenditure meeting all R&D tax relief conditions, with claims for that expenditure, for accounting periods ending within the three years before disposal.

These are not simply “25% growth” or “15 staff” tests. Baselines, qualifying periods, employee definitions and evidence matter. The consultation addresses shorter accounting periods and refers to Enterprise Investment Scheme activity exclusions, including land dealing, financial services and property development. Read the original Treasury consultation and its detailed criteria with your tax specialist.

Many established UK businesses with £2m to £10m turnover will not qualify. That does not make a partial sale less useful commercially; it means the decision should rest on value, terms, partner fit and personal objectives rather than this proposed relief.

Can a founder sell part rather than all?

Under the proposal, an eligible individual could claim on a qualifying disposal of part of an existing shareholding, subject to all conditions and remaining lifetime headroom. The sale crystallises a chargeable gain on the shares sold only. It does not fix the value of shares you keep or protect them from losses.

A full sale, minority sale or majority sale may each be worth considering. The right structure depends on your objectives, buyer demand and the rights you are prepared to share. Not every staged sale qualifies, and a later retained-share sale does not automatically attract 10% CGT.

Selling existing shares or issuing new equity?

Existing shares: the founder sells shares they personally own, and the proceeds come to them. That is a secondary sale and can create a personal chargeable gain.

New shares: the company issues equity to raise money for its growth plan. The money goes into the business, not to the founder. The issue itself is not a disposal by the founder, although their percentage ownership is diluted.

A mixed transaction: a buyer can purchase existing shares and subscribe for new ones. This can combine personal liquidity with growth capital, but the pricing, tax treatment and shareholder rights need to be considered together.

What could a complementary strategic trade buyer contribute?

A useful partner brings something your business can use: distribution into an established customer base, stronger operations, purchasing capability, access to a new market, or capital and people to execute a credible plan. A partnership can also support phased succession where you want to remain involved for a period.

Those benefits are possibilities to test, not promises. We research buyer fit confidentially and act for the seller, not the incoming partner. Read more about finding a strategic trade partner.

Retained shares: governance, risk and a second exit

The shares you keep participate in both future growth and downside. A shareholder agreement should address board representation, reserved matters, information rights, future funding and dilution, dividend policy, leaver provisions, and drag and tag rights.

A later exit needs a workable mechanism, not just an aspiration. Timing, valuation provisions, who can require a sale, and what happens if performance disappoints all matter. Neither a higher second-exit valuation nor the tax treatment of that later disposal is guaranteed. See minority stake protections and two-stage exit planning.

Not qualifying today? Planning a sale in 12–24 months?

It may be worth talking now if a sale is likely in 2027 or 2028. Some existing founders could approach the proposed scale or growth criteria over that period. Others will remain outside them. We can screen the commercial plan now; there is no relief to claim today under this proposal.

Waiting cannot change the stake you held when trade began, shorten the five-year holding period or substitute for UK residence history. The proposed three-period growth sequences and their baselines also need careful review; they cannot necessarily be built within a 12–24 month plan.

Use the time for genuine preparation: stronger management, reliable reporting, recurring revenue where it fits the business, sound R&D recordkeeping and early trade-buyer research. Your accountant or tax solicitor should assess whether the proposed tests are realistically relevant. Avoid artificial steps taken only to chase a tax outcome.

If you are unlikely to qualify, a partial business sale, majority stake sale or full exit may still meet your needs under other tax arrangements. The partner and the terms remain central.

How does BADR fit alongside Founders’ Relief?

Business Asset Disposal Relief is distinct. The Budget proposes reducing the BADR lifetime gains limit from £1m to £500,000 for qualifying disposals from 6 April 2027; the BADR rate is currently 18%. The consultation says amounts claimed under BADR and Investors’ Relief lifetime limits from 6 April 2027 would reduce Founders’ Relief headroom.

The Budget tax-legislation overview also describes special provisions for some pre-6 April 2027 contracts and share reorganisations. Sequencing, previous claims, disposal dates and individual circumstances need specialist tax advice.

A hypothetical partial share sale

What happens in an initial confidential review?

1. Your objectives: we discuss timing, personal capital needs, the business and how involved you want to remain.
2. The commercial options: we consider full or partial sale, readiness and what a complementary buyer would need to bring.
3. Indicative screening: we identify questions against the proposal for your specialist accountant or solicitor. We do not certify eligibility.
4. A sensible next step: we discuss preparation, confidential buyer research or whether no transaction is appropriate yet.

Mergers.co.uk offers sell-side M&A advice, not tax or legal advice. Your specialists must interpret the rules and advise on any transaction.

Questions owners ask

Official sources and current status

• HM Treasury: Founders’ Relief technical consultation, 28 October 2026
• HM Treasury: Budget 2026
• HM Treasury: Overview of Tax Legislation and Rates, Budget 2026

Information reviewed: 28 October 2026. Conditions remain under consultation. Read our Budget 2026 Founders’ Relief announcement commentary.