UK and International Tax news

Autumn 2026 Budget – Founders Relief

Tuesday 10th November 2026

The Chancellor has announced a new capital gains tax relief – Founders Relief – for eligible founders and early investors disposing of qualifying shares or securities in high-growth, innovative companies which have met relevant criteria.

The relief offers a reduced rate of CGT of 10% on disposals of shares up to a lifetime limit of £10m of eligible gains, where the individual has held a large equity stake from commencement of trading.

A technical consultation was launched on 28 October 2026 which sets out the design of the relief and seeks respondents’ views on its practical application.

The measure will have effect for qualifying disposals on or after 6 April 2027.

Under current law, gains on disposals of shares that do not qualify for other reliefs for business assets are chargeable to CGT at the rates of 18% and 24% depending on an individual’s circumstances.

Legislation will be introduced through amendments to the Finance Bill 2026 to provide for a 10% rate of CGT on qualifying disposals of shares up to a lifetime limit of £10m per individual. To be eligible for the relief, the individual will need to:

  • have held at least 25% of the company’s ordinary share capital, at the point when the trading activity for which the company was formed, or the preparation for that trade commenced
  • held the shares or securities for a least five tax years before their disposal
  • have been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.

For a subsequent disposal of shares to qualify the company must:

  • be in scope of UK corporation tax, i.e. being UK-resident for CT purposes, or carrying on business in the UK through a permanent establishment
  • have a substantial UK presence for the five accounting periods before disposal
  • be a trading company, or the holding company of a trading group without substantial non-trading activities or non-qualifying trading activities
  • continue the new trade it was established for when the founder’s shares were issued with no major change in the nature of the trade
  • have turnover of at least £10m and employed at least 15 qualifying full-time equivalent employees in the accounting period ending in the year before disposal
  • have met at least two of the following three conditions:
  1. annual average compound growth in turnover of 25% across three consecutive accounting periods within the ten years before disposal, with turnover of at least £10m in the accounting period before the first of these three periods
  2. annual average compound growth of at least 25% in qualifying full-time equivalent employees across three consecutive accounting periods within the ten years before disposal, with at least 15 full-time employees in the accounting period before the first of these three periods
  3. the company has incurred qualifying expenditure of at least £1.5m on or more on R&D for which it met all the conditions make an R&D tax relief claim, and have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal

Trading activities in certain sectors, the same as those excluded by the EIS, will not qualify for relief, for example dealing in land, financial services or property development. Companies may be listed or unlisted.

References to accounting periods are those for corporation tax but the corresponding number of whole years will apply when such a period is less than 12 months.

The relief will be subject to a claim in the individual’s return. The founders’ relief lifetime limit of £10m will be reduced by claims to BADR and IR made from 6 April 2027.

There will be rules to tackle avoidance and to make sure that the individual has access to the necessary company records.

The consultation closes on 30 November 2026.

If you would like more information on the consultation, please contact Keith Rushen on 0207 486 2378.

 

 

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