Founders' Relief

For founders selling a large stake, leaving the UK before the sale has often been the main way to reduce UK Capital Gains Tax. Founders' Relief proposes a 10% rate for qualifying founders who satisfy its residence and other conditions. The right route depends on your numbers, residence position and plans.

This page summarises HM Treasury's October 2026 technical consultation. The proposals may change before becoming law.

What is proposed

• 10% Capital Gains Tax on qualifying share sales
• A £10 million lifetime limit per person, reduced by amounts claimed against the Business Asset Disposal Relief and Investors' Relief limits from 6 April 2027
• Qualifying disposals on or after 6 April 2027
• A claim made in the individual's Self Assessment return

Who may qualify

• The founder satisfied the 25% ownership, voting, profit and asset-rights tests when the trade, or preparation for it, commenced
• The shares or securities were held for at least five years
• The founder was UK resident for at least five continuous tax years before the disposal
• The company satisfies the UK trading and scale conditions and meets two growth tests: turnover, headcount, or at least £1.5 million of qualifying R&D expenditure supported by a relief claim

Why it matters if you are thinking of leaving

The proposed residence condition could affect when you leave and sell. The detailed treatment of departure years, split years and the disposal year still needs to be confirmed in legislation, so the decision should be modelled rather than assumed.

The company tests in more detail

• The company must be within UK Corporation Tax and have had a substantial UK presence for the five accounting periods before disposal
• It must be a trading company, or the holding company of a trading group, without substantial non-trading or excluded activities
• It must continue the trade for which it was established, without a major change in the nature of that trade
• It must have generated at least £10 million of turnover and employed at least 15 qualifying full-time employees in the accounting period before disposal. Employees must work at least 35 hours a week and be paid at least the National Minimum Wage; directors, contractors and agency workers are excluded

Two of three growth tests must be met

Turnover

Average compound growth of at least 25% across three consecutive accounting periods within the ten years before disposal, starting from turnover of at least £10 million.

Headcount

Average compound growth of at least 25% across three consecutive accounting periods within the ten years before disposal, starting from at least 15 qualifying full-time employees.

R&D

At least £1.5 million of qualifying R&D expenditure for which the company met the conditions and claimed R&D tax relief, in accounting periods ending within the three years before disposal.

Shares and ownership structures

• If the founder qualifies, the relief is proposed to apply to all shares or securities disposed of—not only the original shares
• The 25% test may be met through the holding company of a trading group
• Only individuals will be able to claim the relief

Claim and evidence

• The claim would be made in the Self Assessment return for the year of disposal and may require a standard supporting form
• The proposal includes a statutory right for founders to request relevant information and supporting documents from the company
• Some evidence may relate to periods older than normal company record-keeping requirements
• If a company R&D claim is later successfully challenged and the R&D test was needed, the founder could lose the relief and owe additional tax plus interest

Illustration: £10m gain on qualifying shares

Illustration only. It ignores the annual exempt amount, other relief claims and overseas tax. It is based on the October 2026 HM Treasury technical consultation; the rules may change before legislation.

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