Policy paper

Capital Gains Tax — introduction of a new founders relief

Published 28 October 2026

Who is likely to be affected 

Individuals who dispose of shares or securities in a company which they played a significant role in founding, and which has met specific eligibility criteria.  

General description of the measure 

This measure introduces a new Capital Gains Tax (CGT) relief for eligible founders and early investors disposing of qualifying shares or securities in high-growth, innovative companies which have met all the relevant criteria.  

The relief offers a reduced rate of CGT of 10% on disposals of shares up to a lifetime limit of £10 million of eligible gains, where the individual has held a large equity stake from commencement of trading.  

A technical consultation, launched on 28 October 2026, sets out the design of the relief and seeks respondents’ views on its practical application.  

Policy objective 

To support founders and early investors who have made a significant long-term contribution to the creation and development of the UK’s most high-growth and innovative companies. It is intended to increase the UK’s attractiveness as a location in which founders and early investors can start and scale their companies.  

Background to the measure 

The consultation was launched at Budget 2026.  

Detailed proposal 

Operative date 

The measure will have effect for qualifying disposals on or after 6 April 2027.  

Current law  

Gains on disposals of shares that do not qualify for other reliefs for business assets are chargeable to CGT at the rates of 18% and 24% depending on an individual’s circumstances, as set out at Section 1H of Taxation of Chargeable Gains Act 1992.  

Proposed revisions 

Legislation will be introduced through amendments to the Finance Bill 2026 to provide for a 10% rate of CGT on qualifying disposals of shares up to a lifetime limit of £10 million per individual.  

The individual will need to: 

• have held 25% of the company’s ordinary share capital, at the point when the trading activity for which the company was formed, or the preparation for that trade commenced

• held the shares or securities for a least 5 tax years before their disposal

• have been UK resident under the Statutory Residence Test for at least 5 continuous tax years before the disposal. 

For a subsequent disposal of shares to qualify the company must: 

• be in scope of UK Corporation Tax (defined as being UK-resident for Corporation Tax purposes, or carrying on business in the UK through a permanent establishment) 
• have a substantial UK presence for the 5 accounting periods before disposal
• be a trading company, or the holding company of a trading group without substantial non-trading activities or non-qualifying trading activities 
• continue the new trade it was established for when the founder’s shares were issued with no major change in the nature of the trade
• have turnover of at least £10 million and employed at least 15 qualifying full-time equivalent employees in the accounting period ending in the year before disposal

• have met at least 2 of the following 3 conditions: 

  • annual average compound growth in turnover of 25% across 3 consecutive accounting periods within the 10 years before disposal, with turnover of at least £10 million in the accounting period before the first of these 3 periods

  • annual average compound growth of at least 25% in qualifying full-time equivalent employees across 3 consecutive accounting periods within the 10 years before disposal, with at least 15 full-time employees in the accounting period before the first of these three periods 

  • the company has (1) incurred qualifying expenditure of at least £1.5 million on or more on Research & Development (R&D) for which it met all the conditions make an R&D tax relief claim (2) have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal

Trading activities in certain sectors, the same as those excluded by the Enterprise Investment Scheme, will not qualify for relief. These include companies dealing in land, financial services or property development. Companies may be listed or unlisted.  

References to accounting periods are those for Corporation Tax but the corresponding number of whole years will apply when such a period is less than 12 months. 

The relief will be subject to a claim to HMRC in the individual’s return. The founders’ relief lifetime limit of £10 million will be reduced by claims to Business Asset Disposal Relief (BADR) and Investors Relief (IR) made from 6 April 2027.  

There will be rules to tackle avoidance and to make sure that the individual has access to the necessary company records.  

Summary of impacts 

Exchequer impact (£ million) 

2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
—	-260	-180	-260	-285	-300

These figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2026.   

Economic impact 

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

This measure is expected to impact individuals who are making disposals of shares in businesses in which they own a significant stake. This is estimated to be approximately 600 individuals per year who will be eligible to claim relief on gains up to £10 million. 

This measure is not expected to impact on family formation, stability or breakdown. 

The measure is expected overall to impact qualifying individuals’ experience of dealing with HMRC as they will be required to submit additional information through a supplementary form when making the claim through Self Assessment. 

Equalities impacts 

This measure may apply to individuals regardless of their protected characteristics. The population impacted is expected to be a small subset of the CGT population. HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups. 

Administrative impact on business including civil society organisations 

This measure is expected to have a negligible administrative impact on the approximately 400 businesses per year with founders or investors eligible for the relief where individuals wish to understand if the company has met the qualifying conditions. It is also expected to have a negligible impact on businesses with founders or investors who are not eligible for the relief but wish to understand if they qualify.

These businesses may be required to provide records or information to individual shareholders to allow them to make a claim for relief. One-off costs are expected to include familiarisation with the change. Ongoing costs are expected to include determining whether the criteria are met in the event that a shareholder requests information in support of a claim for relief, and providing that information.  

This measure is expected overall to impact businesses’ experience of dealing with HMRC as they will be required to respond to information requests as above. 

This measure is not expected to impact civil society organisations.  

Operational impact (£ million) (HMRC or other) 

This measure will require changes to HMRC’s processes and IT systems. The full impacts are still being assessed and are yet to be finalised.

Other impacts 

Other impacts have been considered and none have been identified. 

Monitoring and evaluation 

The new relief will be monitored and evaluated once sufficient data has been collected and analysed. 

Further advice 

If you have any questions about this change, contact the Capital Gains Tax policy team by email cgtbudget@hmrc.gov.uk.