UK's new Founders' Relief: 10% tax on up to £10M of exit gains, but only for fast-growing scaleups
What's the deal? Chancellor John Healey used his first Budget, delivered on 28 October 2026, to create a new Founders' Relief. Qualifying founders and significant early investors in "high-growth, innovative" UK companies will pay 10% capital gains tax on up to £10 million of lifetime gains, against the current top rate of 24%. It applies to disposals from 6 April 2027. In the same Budget, the lifetime limit for the existing Business Asset Disposal Relief (BADR) was halved from £1 million to £500,000.
Who qualifies? According to the government's draft design, the founder must have held at least 25% of the shares when trading began, kept them for five tax years and been UK resident for five years. The company must have a substantial UK presence, turnover of at least £10 million and at least 15 full-time staff in the year before the sale. It must also meet two of three growth tests: 25% average annual turnover growth over three years, 25% average annual headcount growth over three years, or at least £1.5 million of R&D spending that qualified for tax relief. The government estimates that about 600 people a year will claim it. S&W cites Budget forecasts putting the cost at £1.3 billion over five years.
The case for: "Entrepreneurs and founders will breathe a sigh of relief after today's Budget," Founders Forum co-founder Brent Hoberman told City AM, calling the relief something founders had "long been calling for". Passion Capital's Eileen Burbidge told the BBC it was a step in the right direction. She also noted that the higher capital gains, wealth and exit taxes investors had feared did not come. The Startup Coalition welcomed the fact that CGT rates were not raised.
The case against: Critics say the relief is narrow. Amadeus Capital's Anne Glover called the overall package "a mixed picture" because of the BADR cut. Accountancy firm S&W said the conditions are "significantly restrictive", and that the rule against a major change in trade could discourage fast-growing companies from pivoting. AO founder John Roberts dismissed the relief on the BBC as a soundbite, saying nobody should start a business because of a tax break. The Startup Coalition still wants a relief for founders who reinvest exit proceeds in new UK startups.
What happens next? A technical consultation on the details runs until 30 November 2026. The government will then finalise the rules, and the relief will be legislated in the Finance Bill.
The signal: The UK is targeting the founders of scaleups that reach a large exit, rather than business owners in general. How much that matters will depend on the final eligibility tests. For a sense of scale, see Dealroom's ranking of Europe's largest VC-backed first exits.
Read more: GOV.UK, City AM, BBC, Startup Coalition, S&W
Image credit: City AM
