Government consults on the detail of Founders' Relief

For qualifying disposals made on or after 6 April 2027, a new CGT Founders' Relief will offer a reduced 10% Capital Gains Tax (CGT) rate to individuals who have started and scaled high-growth, innovative UK companies.

• There will be a lifetime cap of £10 million.
  • This will be reduced by amounts claimed under the limits for Business Asset Disposal Relief (BADR) and Investors' Relief from 6 April 2027.
• The limit will apply per individual, which means more than one person will be able to claim in respect of the same company.

This consultation seeks views on how the qualifying conditions for the relief will work in practice and covers administrative and compliance considerations. The government intends to legislate the relief in Finance Bill 2026-27.

Qualifying conditions: individual and ownership structures

It is proposed that individuals must have:

• held 25% of the company's ordinary share capital (together with corresponding voting rights and rights to distributable profits and assets on a winding up) at the point when the trading activity for which the company was formed commenced, or the preparation for that trade commenced;
• held the shares or securities for at least five years before their disposal and
• been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.

Founders' Relief will:

• Apply to all shares disposed of by a qualifying individual, provided the conditions are met.
• Not be restricted to shares acquired at the time the company was started or to an individual's original shareholding.
• Be available where the 25% condition is met through the holding company of a trading group.
• Only be claimable by individuals.

The government is inviting views on whether the proposed conditions for individuals will allow founders to be effectively identified.

Qualifying conditions: companies

It is proposed that the company must fulfil all the conditions below:

• Be in scope of UK Corporation Tax (CT) and have a substantial UK presence for the five accounting periods before disposal;
  • Being in scope is defined as being UK-resident for CT purposes, or carrying on business in the UK through a Permanent establishment.
• Be a trading company, or the holding company of a trading group, without substantial non-trading activities or excluded trading activities.
  • Excluded activities will mirror those under the Enterprise Investment Scheme (EIS).
• 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.
  • Other trades will be treated in a similar way to excluded trades.
• Have generated turnover of at least £10 million in the accounting period before disposal. 
• Have employed at least 15 qualifying full-time employees in the accounting period prior to disposal.
  • A qualifying full-time employee works at least 35 hours per week and is paid at least the UK National Minimum Wage.
  • Directors, contract and agency workers are excluded.

The government is inviting views on these proposed conditions, namely whether:

• They will ensure that the relief focuses on UK trading companies that have reached sufficient scale and continue to carry on the trade they were established for.
• There are any practical difficulties or unintended consequences in applying them.

Growth and innovation conditions

The company must also meet at least two of the three proposed growth and innovation tests.

The three tests are:

1. Turnover test
   • Annual average compound growth in turnover of 25% across three 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 three periods.
2. Headcount test
   • Annual average compound growth of at least 25% in qualifying full-time equivalent employees across three 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.
3. Innovation test
   • The company must:
     • have incurred qualifying expenditure of £1.5 million or more on Research and Development (R&D) for which it met all of the conditions to make an R&D tax relief claim and
     • have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal.

The government is inviting views on whether:

• There are any practical difficulties, administrative burdens or unintended consequences in applying the three tests.
• There might be alternative criteria that would identify innovative companies other than the R&D test.

Administration and compliance

The government is proposing that Founders' Relief will be claimed by the individual in their Self Assessment tax return, but recognises that a claimant may face practical difficulties in gathering the information they need.

• The company will hold some of the required information.
  • Because of the growth test, which looks back up to ten years, some information may relate to periods outside statutory record-keeping requirements.
• To address this problem, the government is proposing to introduce a statutory right for an individual to request the information and any supporting documentation they need to establish their entitlement to Founders' Relief.
  • Companies would be required to respond within a specified period.

A further potential issue arises if HMRC take compliance action and deny an R&D claim the individual relied on when claiming Founders' Relief.

• If the individual consequently no longer qualifies, they would lose the relief and owe the additional tax with interest.
• It also raises questions about taxpayer confidentiality and the extent to which HMRC can share information about the company's tax affairs with an individual whose claim is affected.

The government is inviting views on how it can address these issues, and whether the relief's design contains any other avoidance or administrative risks.

The consultation closes on 30 November 2026. Responses can be made by email to This email address is being protected from spambots. You need JavaScript enabled to view it..

Useful guides on this topic

SRT: Statutory Residence Test
What is the Statutory Residence Test (SRT)? Why is it important and how does it determine a person's residency?

EIS: Enterprise Investment Scheme
When can EIS relief be claimed? What are the conditions for EIS relief? What are the benefits of EIS relief?

Research & Development Tax Reliefs
What is R&D Relief? How does it work? Why does the size of the company matter? What is sub-contracted R&D? How do I write an R&D Report?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of a business
Entrepreneurs' Relief (ER) was renamed Business Asset Disposal Relief (BADR) by Finance Act 2020. When does BADR apply? What is the rate of BADR? How do you claim BADR? What BADR case law is there?

Investors' Relief
What is Investors' Relief? How does it differ from Business Asset Disposal Relief? Which disposals qualify? What are the conditions?

External link

CGT Founders' Relief: technical consultation

Question 1: Noting the need for a clear definition of individuals who held a significant early stake in the company, will the individual conditions, including the treatment of ownership structures and reorganisations, effectively identify founders?

Question 2: Will the company conditions effectively focus Founders’ Relief on UK trading companies that have reached sufficient scale and continue to carry on the trade they were established for?

Question 3: Are there practical difficulties or unintended consequences in applying them?

Question 4: Are there any practical difficulties, administrative burdens or unintended consequences for founders or companies in applying the three tests?

Question 5: Are there alternative criteria which might provide a robust and objective means of identifying innovative companies other than the R&D test set out above?

Question 6: Are there any practical difficulties, for individuals or companies, with the proposed statutory right for individuals claiming the relief to request information and supporting documentation from a company? The government would also welcome views on the period within which companies should be required to provide the information.

Question 7: What avoidance or administrative risks could arise from the proposed design? Where respondents identify risks, we would also welcome views on potential changes or safeguards that could address them.