Founders’ Relief is a new Capital Gains Tax relief, announced in the Autumn Budget on 28 October 2026. The Founders’ Relief charges 10% on up to £10 million of lifetime gains when a qualifying founder sells shares on or after 6 April 2027. The rate and limit are confirmed, but the rules on who qualifies are still out for consultation until 30 November 2026.
Key Takeaways
- Founders’ Relief charges 10% Capital Gains Tax on up to £10 million of lifetime gains for qualifying disposals from 6 April 2027.
- Only the rate, the limit and the start date are settled, and the eligibility rules are out for consultation until 30 November 2026.
- You need to have held at least 25% of the shares when trading began, plus five years of ownership and five years of UK residence.
- The company needs £10 million of turnover and 15 full-time employees before the sale, and must pass two of three growth and innovation tests.
- The Business Asset Disposal Relief lifetime limit halves to £500,000 on the same date, which adds up to £30,000 of tax on a £1 million gain.
Table of contents
1. Who counts as a founder?
You count as a founder if you held at least 25% of the company’s ordinary share capital, with matching voting and profit rights, when its trade (or preparation for that trade) began.
Under the draft rules you also need to:
- have held the shares for at least five years before you sell
- have been UK resident under the Statutory Residence Test for at least five continuous tax years before the sale
- be claiming as an individual (the 25% can sit in the holding company of a trading group, but companies and trusts can’t claim)
Once you qualify, the relief covers all your shares, including ones bought later.
Unlike BADR, there’s no requirement to work in the business.
An angel who put in seed money for 25% at the outset could qualify alongside the people running the company. A spouse or relative who held 25% when trading began would also count, with a separate £10 million limit.
2. Founders’ Relief vs Business Asset Disposal Relief (BADR)
Founders’ Relief is cheaper when you qualify and far harder to qualify for.
Chancellor John Healey announced it alongside a cut to BADR: BADR charges 18% for 2026/27 on gains up to a £1 million lifetime limit, and that limit falls to £500,000 for disposals on or after 6 April 2027. Founders’ Relief charges 10% on up to £10 million.
The entry rules pull the other way.
BADR on GOV.UK needs a 5% shareholding held for two years while you’re an officer or employee of the company. Founders’ Relief needs 25% from day one, five years of ownership and residence, and a £10 million-turnover company, but no job title.
HMRC’s policy paper estimates that only around 600 people a year will be eligible for Founders’ Relief, so for most owner-managed creative businesses BADR is still the relief that matters, and the cut costs up to £30,000.
On a £1 million gain, the bill rises from £180,000 to £210,000 because the second £500,000 moves to the 24% main rate. Our Business Asset Disposal Relief guide has the full conditions.
The two reliefs share a limit. Founders’ Relief doesn’t replace BADR or Investors’ Relief, but anything claimed under either from 6 April 2027 comes off your £10 million, so a BADR claim on a smaller sale can shrink the bigger one later.
3. What Founders’ Relief is worth: a worked example
Say you co-founded a games studio in 2019 with a 30% stake, the studio passes the company tests, and in 2027/28 you sell for a £4 million gain. You’re a higher-rate taxpayer and have never claimed BADR. This ignores the £3,000 annual exempt amount.
- Founders’ Relief: £4,000,000 × 10% = £400,000
- BADR after 6 April 2027: £500,000 × 18% + £3,500,000 × 24% = £930,000
- No relief: £4,000,000 × 24% = £960,000
Qualifying saves £530,000 compared with BADR alone. The table below runs the same assumptions at three gain sizes:
| Gain | BADR, sale before 6 April 2027 | BADR, sale from 6 April 2027 | Founders’ Relief |
|---|---|---|---|
| £500,000 | £90,000 | £90,000 | £50,000 |
| £1,000,000 | £180,000 | £210,000 | £100,000 |
| £4,000,000 | £900,000 | £930,000 | £400,000 |
Up to £500,000 the BADR cut changes nothing, though Founders’ Relief still saves £40,000. Above it, the gap widens with every pound of gain.
4. Talking Founders’ Relief through with WallsMan Creative
WallsMan Creative are specialist accountants for the creative industries, working from Somerset House and Kingston upon Thames with studios, agencies, production companies and the founders behind them. The share structures, records and relief claims Founders’ Relief depends on are work we do with those clients every year.
Founders’ Relief offers 10% on up to £10 million, but the draft tests are written for companies with £10 million of turnover, 15 full-time staff and three years of fast growth or serious R&D spending. Most creative business owners will feel the BADR cut first, and that lands on 6 April 2027.
If you’re weighing a sale in the next couple of years, or want to know if your company is on course to qualify, get in touch and we’ll run your numbers against both reliefs.
