Govt to introduce CGT ‘Founders’ Relief’ while halving BADR

Chancellor, John Healey, has announced the introduction of a new ‘Founders’ Relief’, which will provide a 10 per cent capital gains tax (CGT) rate for qualifying founders on up to £10m of gains, and halved Business Asset Disposal Relief (BADR).

In the Autumn Budget, Healey revealed that Founders’ Relief will apply a 10 per cent CGT rate to qualifying disposals of shares on up to £10m of lifetime gains for qualifying company founders from April 2027.

A consultation on the proposals has been launched, with the measure set to be introduced through the Finance Bill 2026/27.

To qualify for Founders' Relief, founders will typically need to have held at least a quarter of the business when it was formed, had shares for at least five years and been a UK resident for five straight tax years before selling, and for the company to have at least £10m of turnover and 15 full-time employees.

Meanwhile, Healey also announced that the lifetime limit on gains eligible for BADR will be halved from £1m to £500,000.

The updated threshold will apply to disposals from 6 April 2027, with legislation to be introduced in the Finance Bill 2026/27.

Changes to capital gains legislation will also be made to ease the administrative burden around the ‘exit charge’ that applies when a trust ceases to be resident in the UK.

The government said this would make it easier for globally mobile talent to relocate to the UK more quickly.

The changes will apply from 28 October 2026, with legislation to be introduced in the Finance Bill 2026/27.

“Founders’ Relief is a welcome recognition that if Britain wants entrepreneurs to take risks, build businesses and create jobs here, there needs to be a meaningful reward for success,” said Wealth Club head of investment research, Jonathan Moyes.

“However, the government is dangling a carrot with one hand and taking with the other. Alongside this noisy new relief, the lifetime limit for BADR has been halved to £500,000.

“For business owners who do not meet the extraordinarily demanding criteria for the new Founders’ Relief, this is another significant blow to hard working entrepreneurs across the country.”

Isio Wealth Planning director, Richard Paddle, added: “Halving the BADR on qualifying gains from £1m to £500,000 will be disappointing for business owners whose eventual disposals would otherwise benefit from the higher limit.

“Yet the proposed Founders' Relief, offering a 10 per cent CGT rate on lifetime gains of up to £10m, could provide a much more generous incentive for those who qualify.

“Its headline terms echo the former Entrepreneurs' Relief, although the eligibility criteria and interaction with BADR will be crucial.

“Increasing the generosity of the Company Share Option Plan is another potentially positive step for growing businesses looking to attract and retain talent.”

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