Among the range of announcements made in the 2026 Autumn Budget, Founders’ Relief was among those likely to get business owners talking.
Aside from curiosity about the level of relief it provides, many people will be asking who qualifies.
However, under current proposals, most founders will unfortunately not qualify, as the relief is aimed at the founders of the UK’s largest and rapidly growing firms.
While many business owners may be unable to claim when it is first rolled out, understanding the new rules may influence future succession plans and business sale decisions.
What is Founders’ Relief?
For eligible claims for Founders’ Relief made from 6 April 2027, disposals will be subject to a reduced rate of Capital Gains Tax (CGT).
Instead of being charged the normal 24 per cent rate of CGT, founders will be taxed at 10 per cent, up to a maximum lifetime limit of £10 million.
In comparison, gains that qualify for Business Asset Disposal Relief (BADR) are currently taxed at 18 per cent up to a lifetime limit of £1 million, falling to £500,000 from April 2027.
Where available, Founders’ Relief can be significantly more valuable than BADR due to the greater potential for tax savings, allowing founders to retain a larger share of the proceeds from a business sale.
What conditions must be met?
Qualifying for Founders’ Relief is no easy feat, with three sets of conditions that need to be met.
To qualify for Founders’ Relief, shareholders must first meet all of the following:
- They held the shares or securities for a minimum of five years before disposal
- They have been a UK resident for at least five years prior to the disposal, as determined by a statutory residence test
- They have held at least 25 per cent of the company’s ordinary share capital at the point the company started trading or preparing to trade.
Then, for a company to qualify for Founders’ Relief, the following criteria need to have been met at the time of share disposal:
- It had a turnover of at least £10 million in the accounting period before share disposal
- There were at least 15 full-time employees in the accounting period before the share disposal
- It is a trading company or the holding company of a trading group
- It falls within the net of Corporation Tax, with a substantial UK presence for its last five accounting periods
Finally, the company must pass two of the following three tests to demonstrate a level of growth, which will likely decide eligibility for many prospective claimants:
- There was an average growth, from a starting point of £10 million, of 25 per cent a year over three consecutive years within the ten years before disposal
- At least £1.5 million of qualifying research and development spending, with relief claimed for accounting periods ending in the three years before the sale
- The number of employees must have increased at a certain rate, starting from at least 15 employees. At least 15 full-time staff must also have been working during the year before the business was sold
Speak to an accountant
While Founders’ Relief may not be accessible to the vast majority of UK businesses, it is far from the only form of CGT relief available.
BADR and Investor Relief, among a plethora of other tax planning opportunities, can help to reduce the tax burden when selling a business.
By speaking to our accountants at an early stage, we can help you incorporate CGT reliefs into your exit strategy and minimise tax liabilities.
Unsure which Capital Gains Tax relief you may be eligible for? Speak to our accountants for expert tax planning advice.
