Budget 2026 announces Founders’ Relief: what it could mean for business owners

What did the Budget announce?

The Government has announced proposed Founders’ Relief: 10% Capital Gains Tax on qualifying disposals of shares, up to £10 million of lifetime qualifying gains per individual, from 6 April 2027. That is a limit on gains, not the value of a business or the proceeds of a sale.

The intended beneficiaries are founders and significant early investors in high-growth, innovative UK companies. This is not a general 10% rate for business owners. The individual, company and growth conditions would all need to be considered against the eventual legislation.

Why it matters for a partial business sale

For an owner who wants to release personal capital without leaving the business entirely, a partial sale remains a practical option. A complementary strategic trade partner may bring customers, operational capability or access to new markets while you retain an interest in future performance.

Under the proposal, a qualifying disposal of some personally held existing shares could create a gain eligible for 10% CGT, subject to every condition and remaining lifetime headroom. Issuing new shares instead puts capital into the company; it is not the founder selling shares. A transaction can combine the two.

The shares you retain remain exposed to growth and downside. Their future value is not guaranteed, and a later sale does not automatically qualify for the relief. Governance, dilution, decision-making and the second-exit provisions need careful agreement.

The consultation leaves important questions open

The proposed tests include a 25% founding ordinary stake with specified rights when trade began, five-year holding and UK residence requirements, a qualifying UK trading presence, at least £10m turnover and 15 qualifying full-time employees before disposal, and at least two demanding growth or innovation tests.

The growth tests have historical windows and minimum baselines; simply growing by 25% is not enough. Many established £2m–£10m turnover SMEs, and some founders of larger companies, will not qualify. Definitions, evidence, reorganisations and practical administration remain matters for consultation.

The Budget also proposes reducing the BADR lifetime gains limit from £1m to £500,000 from 6 April 2027. BADR currently carries an 18% rate. Under the Founders’ Relief proposal, BADR and Investors’ Relief claims from that date would reduce Founders’ Relief lifetime headroom. These interactions require specialist tax advice.

Our permanent Founders’ Relief eligibility and partial-sale planning page sets out the proposed checklist, a clearly hypothetical gain comparison and the confidential review process.

Planning 12–24 months ahead without assuming eligibility

If a sale is on your mind for 2027 or 2028, preparation can begin now. Clear management responsibilities, reliable accounts, sustainable revenue, genuine R&D records and confidential buyer research are useful regardless of the final tax rules.

An existing founder approaching some proposed thresholds may have a reason to review timing. Waiting cannot change historic founding ownership or shorten five-year requirements, and it may not create the required historical growth sequence. Your tax specialist should test feasibility rather than assume qualification.

Owners outside the relief can still consider a partial sale, a majority sale or a full exit. The tax position should support a sound commercial decision, not persuade you into a poor partnership.

Primary Government sources

• 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. Mergers.co.uk provides sell-side M&A advice, not tax or legal advice. Your accountant and solicitor should advise on the tax and legal position.