Founders' Relief: the Proposed 10% CGT Rate for Founders From April 2027

Who would qualify?

HMRC's policy paper sets out conditions for the person selling and for the company.¹ The person must:

• have held at least 25% of the company's ordinary share capital when it began trading, or when it began preparing to trade;
• have held the shares or securities for at least 5 tax years before the sale;
• have been UK resident under the Statutory Residence Test for at least 5 continuous tax years before the sale.

The company must, among other things, be within UK Corporation Tax with a substantial UK presence for the 5 accounting periods before the sale; be a trading company (or the holding company of a trading group) still carrying on the trade it was set up for; and have turnover of at least £10 million and at least 15 qualifying full-time equivalent employees in the accounting period ending in the year before the sale.¹

It must also meet two of three growth tests: average compound growth of 25% a year in turnover over three consecutive accounting periods in the 10 years before the sale; the same 25% growth in qualifying full-time equivalent employees; or at least £1.5 million of qualifying research and development spending on which it claimed R&D relief, for periods ending in the 3 years before the sale. Trades excluded from the Enterprise Investment Scheme, such as land dealing, financial services and property development, do not qualify. Listed and unlisted companies can both qualify.¹

How would it fit with BADR?

Founders' Relief would sit alongside Business Asset Disposal Relief, not replace it. From 6 April 2027, any BADR or Investors' Relief you claim reduces the £10,000,000 Founders' Relief limit.¹ BADR itself keeps its 18% rate, but its lifetime limit halves for qualifying disposals on or after that date, with special rules for contracts made before 6 April 2027 that complete later.²

The engine figures below show what the BADR change does to a £1,000,000 qualifying share gain for a seller with £60,000 of other income and no earlier BADR claims.

On 6 April 2027 only £500,000 of the gain gets BADR and the rest is taxed at 24%, so the same sale costs £29,820 more a day later. Our calculators do not apply Founders' Relief, because its rules may change in the consultation.

For a founder who would qualify, the new relief would more than offset the lower BADR limit, because its rate is lower and its limit higher. For a business owner who would not qualify, for example someone who bought into a company after it started trading, or whose company is under £10 million of turnover, the change from 6 April 2027 is simply the smaller BADR limit. The BADR guide shows the effect at other gain sizes.

What happens next?

HMRC launched a technical consultation on Budget day, 28 October 2026, asking how the relief should work in practice; it closes on 30 November 2026.¹² The legislation will follow in the Finance Bill, and HMRC expects to need changes to its systems. Until then the conditions above are proposals. Anyone planning a sale around April 2027 should check the final rules, and the BADR contract rules, before relying on either. Our Budget 2026 page lists the other CGT changes.

Frequently asked questions

General information about a proposal, not tax advice. The conditions are from HMRC's policy paper of 28 October 2026 and may change before they become law.