Founders' Relief: who qualifies, on the consultation text

A 10 per cent rate on up to £10 million, for approximately 600 people a year. The tests as the Treasury wrote them, and what the consultation leaves open.

Winny, for Windfall Intelligence · Published 2 November 2026

The Budget of 28 October 2026 trimmed the relief for the larger seller and offered something rather generous to a very small number of extraordinary ones. This page reads the offer as the Treasury wrote it, because the conditions are where the generosity ends.

In short

Founders' Relief is a proposed 10 per cent Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying disposals from 6 April 2027, set out in HM Treasury's technical consultation of 28 October 2026, which closes on 30 November 2026. Under the October 2026 proposals the individual must have held 25 per cent from the start of trading, and the company needs £10 million of turnover, 15 full-time employees and two of three growth tests.

Key takeaways

Founders' Relief would tax qualifying gains at 10 per cent up to a £10 million lifetime limit per individual, for disposals on or after 6 April 2027, under a consultation that closes on 30 November 2026.
The individual must have held 25 per cent of the ordinary share capital when the company's trade, or preparation for it, began, held the shares for five years and been UK resident for five continuous tax years, on the October 2026 text.
The company must have had at least £10 million of turnover and 15 qualifying full-time employees in the accounting period before disposal, and pass two of three growth and innovation tests, under the October 2026 proposals.
HMRC estimated on 29 October 2026 that approximately 600 individuals a year will be eligible, against approximately 51,000 claimants of business asset disposal relief.
Any business asset disposal relief or Investors' Relief claimed from 6 April 2027 reduces the £10 million Founders' Relief limit, on Budget 2026's rates annex of 28 October 2026.

What is Founders' Relief?

Founders' Relief is a new Capital Gains Tax relief announced in the Budget of 28 October 2026 for "founders and significant early investors in high-growth, innovative UK companies". HM Treasury's technical consultation, published the same day, proposes a 10 per cent rate on qualifying disposals up to a lifetime limit of £10 million of gains per individual, for disposals made on or after 6 April 2027.

The relief is proposed, not enacted, and its design may change. The consultation says the government "will use responses to finalise the design" and then legislate "through amendments to Finance Bill 2026-27". HMRC's impact note of 29 October 2026 calls the same bill "the Finance Bill 2026".

The limit is per individual: the October 2026 consultation says "more than one individual could claim in respect of the same company". Only individuals can claim, and HMRC's impact note of 29 October 2026 says "Companies may be listed or unlisted."

The arithmetic shows why the relief matters to the few who qualify. For a higher-rate taxpayer, a £10 million qualifying gain from 6 April 2027 would be taxed at £1 million under Founders' Relief, against £2.4 million at the 24 per cent main rate, a difference of £1.4 million. The 10 per cent rate is the rate business asset disposal relief charged on disposals on or before 5 April 2025.

Which individuals qualify for Founders' Relief?

Three individual conditions apply, in paragraph 2.5 of the consultation of 28 October 2026. The individual must:

have held 25 per cent of the ordinary share capital, with the matching voting rights and rights to profits and to assets on a winding up, when the trade for which the company was formed, or preparation for it, commenced (the October 2026 text);
have held the shares or securities for at least five years before disposal;
have been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.

The relief would cover all shares the qualifying individual disposes of, not only the original holding, and under the October 2026 proposals the 25 per cent may be held through the holding company of a trading group.

The stake is tested at the start, not at the sale. On the October 2026 text, a founder who began with 20 per cent alongside four equal co-founders does not meet the condition however large the company becomes, and the text does not mention a later dilution as a bar. The consultation's question 1 asks whether these conditions "effectively identify founders".

Which companies qualify for Founders' Relief?

The company conditions, in paragraph 2.7 of the consultation of 28 October 2026, are cumulative. The table sets them out as the consultation states them.

Company condition, consultation of 28 October 2026	What it requires
UK tax presence	In scope of UK Corporation Tax (UK-resident, or trading in the UK through a permanent establishment), with a substantial UK presence for the five accounting periods before disposal
Trading	A trading company, or the holding company of a trading group, without substantial non-trading or excluded activities
Excluded trades	The same as the Enterprise Investment Scheme's, such as dealing in land, financial services or property development
Same trade	Continues the new trade it was established for when the founder's shares were issued, with no major change in its nature
Scale: turnover	At least £10 million in the accounting period prior to disposal
Scale: people	At least 15 qualifying full-time employees in that period: at least 35 hours a week, paid at least the National Minimum Wage, excluding directors, contract and agency workers

What are the growth and innovation tests for Founders' Relief?

The company must meet at least two of three tests, in paragraph 3.2 of the consultation of 28 October 2026, on top of the company conditions.

Turnover test. Annual average compound growth in turnover of 25 per cent across three consecutive accounting periods within the ten years before disposal, from at least £10 million in the period before the first of the three (October 2026 text).
Headcount test. The same 25 per cent compound growth in qualifying full-time equivalent employees, from at least 15 full-time employees in the period before the first of the three (October 2026 text).
Innovation test. Qualifying research and development expenditure of £1.5 million or more, for which the company met all the conditions for, and claimed, R&D tax relief, in an accounting period or periods ending within the three years before disposal.

The arithmetic sets the bar. Under the October 2026 proposals, a company starting the turnover test at £10 million must reach about £19.5 million three periods later, since 25 per cent compound growth over three years multiplies turnover by 1.95. The headcount test, from a base of 15, needs at least 29.3 qualifying full-time equivalent employees three periods later on the October 2026 text (15 × 1.953).

A company that innovates without claiming R&D tax relief can still qualify on turnover and headcount, and the consultation's question 5 asks for alternatives to the R&D test.

Why will few founders qualify for Founders' Relief?

The government's own figures say so. HMRC's impact note of 29 October 2026 estimates approximately 600 individuals a year eligible for the relief, connected with approximately 400 businesses a year, against approximately 51,000 claimants of business asset disposal relief in the impact note on that relief published the same day.

The tests compound: a quarter of the company from the start, five years held, five years resident, the original trade, the scale conditions and two growth tests, each removing owners who passed the one before.

The cost reflects the narrow target. HMRC's impact note of 29 October 2026 puts the cost to the Exchequer at £260 million in 2027-28, £180 million in 2028-29 and £300 million by 2031-32, figures certified by the Office for Budget Responsibility. The Budget 2026 policy costings of 28 October 2026 add that the estimate allows for "some near-qualifying companies" restructuring so that individuals become eligible, and the consultation says targeted anti-avoidance rules "will be considered".

The house's electronic accounts can show only a floor. As at 2 November 2026, 1,583 active companies with an individual recorded as holding more than 25 per cent of the shares reported turnover of £10 million or more on their latest accounts, out of 37,049 such companies that reported turnover at all; most small companies omit turnover, and many larger companies file on paper. A stake held today is not a stake held at the start of trading.

What is still open in the Founders' Relief consultation?

The consultation of 28 October 2026 asks seven questions and leaves the administration largely open. It closes at 11:59pm on 30 November 2026, a period the document calls "shorter than usual" because evidence was gathered in the earlier call for evidence on tax support for entrepreneurs; responses go to HM Treasury by email.

Open point, consultation of 28 October 2026	What the document proposes or asks
Individual conditions (question 1)	Whether the 25 per cent, five-year and residence tests identify founders, including ownership structures and reorganisations
Company conditions (questions 2 and 3)	Whether they focus the relief on UK trading companies of sufficient scale, and any practical difficulties
Growth tests (questions 4 and 5)	Practical difficulties with the three tests, and alternatives to the R&D test
Access to company records (question 6)	A proposed statutory right for an individual to request information from the company within a specified period, preferred to a certificate from the company or HMRC
Avoidance and administration (question 7)	Risks in the design and safeguards against them
Claims	In the Self Assessment return for the year of disposal, possibly with a standard form; a claim without the specified information is treated as unsatisfactory

Two further points matter to a founder who claims. The consultation says that if HMRC later finds a condition was not met, for example after compliance action on the company's R&D claim, the individual "will lose entitlement" and pay the extra tax with interest. And it raises, without resolving, how far HMRC can share the company's tax affairs with an individual whose claim depends on them.

The primary texts also differ in small ways that the final legislation will settle. HMRC's impact note of 29 October 2026 says the shares must be held for "5 tax years" and measures scale in "the accounting period ending in the year before disposal"; the consultation of 28 October 2026 says "five years" and "the accounting period prior to disposal". For the scale condition the impact note says "full-time equivalent employees" where the consultation says "full-time employees". The consultation does not give a date for the government's response.

How does Founders' Relief sit beside business asset disposal relief?

The two reliefs differ in almost every term. The table compares them on the Budget 2026 documents of 28 and 29 October 2026 and gov.uk's guidance read on 2 November 2026.

Term, from 6 April 2027	Business asset disposal relief	Founders' Relief (proposed)
Rate	18 per cent	10 per cent
Lifetime limit	£500,000	£10 million, reduced by BADR and Investors' Relief claimed from 6 April 2027
Shareholding	At least 5 per cent, for two years	25 per cent at the start of trading
Holding period	Two years	Five years
Company scale	None	£10 million turnover and 15 qualifying full-time employees
Growth tests	None	Two of three: turnover, headcount, R&D
People (HMRC, 29 October 2026)	Approximately 51,000 claimants	Approximately 600 a year eligible

Budget 2026's rates annex of 28 October 2026 says business asset disposal relief or Investors' Relief claimed from 6 April 2027 reduces the Founders' Relief limit; the text does not say earlier claims do. The cut to the older relief is read in what Budget 2026 means for owners planning to sell.

What should an adviser watch on Founders' Relief?

Four steps, in order: the consultation closes on 30 November 2026; the government's response follows, with no date given; the amendments to Finance Bill 2026-27 carry the final tests; and the relief applies to qualifying disposals from 6 April 2027.

For a private banker, the relief marks a small number of owners whose company has grown fast from a £10 million base, under the October 2026 proposals, and whose stake, where it is more than 25 per cent, is visible on the register of people with significant control long before any sale. In the house's experience, whether such a founder already has a private bank depends on who advised on the transaction, how wealthy the founder already is, and what the founder has needed from a bank before.

Frequently asked questions

What is the Founders' Relief rate?

The proposed rate is 10 per cent on qualifying gains, up to a lifetime limit of £10 million per individual, for disposals on or after 6 April 2027, on HM Treasury's consultation of 28 October 2026. It is a proposal under consultation and its design may change.

When does the Founders' Relief consultation close?

The consultation closes at 11:59pm on 30 November 2026, on its gov.uk page published on 28 October 2026. Responses go to HM Treasury by email, and the government has not said when it will publish its response.

Do you need 25 per cent of the company to claim Founders' Relief?

Yes, on the October 2026 text: the individual must have held 25 per cent of the ordinary share capital, with the matching voting and economic rights, when the company's trade or its preparation began. The October 2026 text allows the 25 per cent to be held through the holding company of a trading group.

Can you claim Founders' Relief and business asset disposal relief?

The documents link them through the limit, on Budget 2026's rates annex of 28 October 2026: any business asset disposal relief or Investors' Relief claimed from 6 April 2027 reduces the £10 million Founders' Relief limit. How the reliefs interact on a single disposal is for the final rules in Finance Bill 2026-27.

How many people will qualify for Founders' Relief?

HMRC's impact note of 29 October 2026 estimates approximately 600 individuals a year will be eligible, connected with approximately 400 businesses a year. Business asset disposal relief has approximately 51,000 claimants on HMRC's figures of 29 October 2026.

Method

Every condition is quoted or closely paraphrased from HM Treasury's technical consultation of 28 October 2026 and HMRC's impact note of 29 October 2026, read on 2 November 2026; where the two differ, both are given. The relief is under consultation as at 2 November 2026 and nothing here is tax advice. The house's figures are counts of The Gazette notices with code 2431 and of declarations of solvency the house read in October 2026, measured on 2 November 2026 with measure-ledger.ts; sworn surpluses are per company and never summed. The turnover counts come from measure-research-counts.ts, run on 2 November 2026 over the electronically filed accounts the house held; most small companies omit turnover and companies filing on paper, including many full and group accounts, are largely absent, so each count is a floor.

Sources

HM Treasury, "Founders' Relief: technical consultation", gov.uk page, published 28 October 2026, read 2 November 2026: https://www.gov.uk/government/consultations/founders-relief-technical-consultation
HM Treasury, "CGT Founders' Relief: technical consultation", PDF, October 2026, read 2 November 2026: https://assets.publishing.service.gov.uk/media/6ae1c5487fe45a08a4036e4d/CGT_Founders__Relief_-_technical_consultation.pdf
HMRC, "Capital Gains Tax: introduction of a new founders relief", tax information and impact note, 29 October 2026, read 2 November 2026: https://www.gov.uk/government/publications/capital-gains-tax-introduction-of-a-founder-relief/capital-gains-tax-introduction-of-a-new-founders-relief
HMRC, "Capital Gains Tax: new Business Asset Disposal Relief lifetime limit", tax information and impact note, 29 October 2026, read 2 November 2026: https://www.gov.uk/government/publications/capital-gains-tax-reduction-in-the-business-asset-disposal-relief-lifetime-limit/capital-gains-tax-new-business-asset-disposal-relief-lifetime-limit
HM Treasury, "Budget 2026: overview of tax legislation and rates, Annex A: rates and allowances", 28 October 2026, read 2 November 2026: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances
HM Treasury, "Budget 2026 Policy Costings", October 2026, read 2 November 2026: https://assets.publishing.service.gov.uk/media/6ae1883fe4367e5c8b0467df/AB26_Policy_Costing.pdf
gov.uk, "Business Asset Disposal Relief", read 2 November 2026: https://www.gov.uk/business-asset-disposal-relief
The Gazette, notices with code 2431, October 2026, and Companies House declarations of solvency (form LIQ01), measured 2 November 2026.

Winny is the house’s pen name. This page is written by Windfall Intelligence Ltd from the UK public record, every figure re-measured on the date it carries, and checked by a person before publication. How these pages are made. Corrections to hello@joinwindfall.com.