The government has announced a new Capital Gains Tax (CGT) relief for founders and significant early investors in high-growth, innovative UK companies. Founders’ Relief will provide a reduced CGT rate of 10% on qualifying gains from disposals of shares, subject to a lifetime limit of £10m per individual.

The relief is intended to recognise the long-term contribution made by entrepreneurs and early investors to the creation and development of successful businesses in the UK.

The relief is also intended to apply to qualifying disposals made on or after 6 April 2027. However, its detailed conditions are still being developed. HM Treasury published a technical consultation on 28 October 2026, seeking views on how the relief should operate in practice.

Under the consultation proposals, the relief would be subject to specific conditions relating to the individual, the company and its growth and innovation record. These conditions are intended to ensure that the relief benefits founders and early investors in businesses that have demonstrated sustained growth, rather than applying generally to shareholders disposing of shares in successful companies.

An individual would generally need to:

• have held at least 25% of the company's ordinary share capital, together with corresponding voting rights and rights to distributable profits and assets on a winding up, when the company's trading activity commenced or preparations for the trade began
• have held the shares or securities for at least five years before disposal, and
• have been UK resident for at least five continuous tax years before the disposal. The proposals would allow the 25% ownership condition to be met through a holding company of a trading group.

The company will need to:

• 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); and the business must 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 excluded trading activities. For the purposes of Founders’ Relief excluded trading activities will be the same as those set out for the existing Enterprise Investment Scheme (such as dealing in land, financial services or property development)
• 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. Any other trades will be treated in a similar way to excluded trades
• have generated turnover of at least £10m in the accounting period prior to disposal; and
• have employed at least 15 qualifying full-time employees in the accounting period prior to disposal. A qualifying full-time employee will be defined as an individual working at least 35 hours per week (as with the Enterprise Investment Scheme), paid at least the UK National Minimum Wage. Directors, contract and agency workers will be excluded from this condition.

In addition, the company would need to demonstrate sustained growth or innovation by meeting at least two of three proposed tests:

• Turnover growth: average annual compound growth of at least 25% over three consecutive accounting periods within the ten years before disposal, with turnover of at least £10m in the accounting period before the three-year period
• Employee growth: average annual compound growth of at least 25% in qualifying full-time equivalent employees over three consecutive accounting periods within the ten years before disposal, with at least 15 full-time employees in the accounting period before that period
• Research and development: qualifying R&D expenditure of at least £1.5m, for which the company met the conditions to claim R&D tax relief, with claims made for accounting periods ending within the three years before disposal.

These tests are intended to identify companies that have achieved significant growth or invested substantially in innovation. The government acknowledges that not all innovation involves qualifying R&D expenditure, which is why a company may qualify through the turnover and employee growth tests instead.

The proposed £10m lifetime limit would apply to each individual, meaning that more than one founder or investor could claim the relief in relation to the same company. However, the consultation proposes that the limit would be reduced by amounts claimed under the lifetime limits for Business Asset Disposal Relief and Investors’ Relief from 6 April 2027. Only individuals would be able to claim Founders’ Relief.

The proposals remain subject to consultation so investors should not assume that the final eligibility conditions will be identical to those currently proposed. The full consultation document is available here.