Autumn Budget 2026: new 10% CGT Founders’ Relief announced as BADR lifetime limit is halved

Helen Mather, Partner

In the Autumn Budget delivered today, Chancellor John Healey announced a brand-new Capital Gains Tax (CGT) relief called “Founders’ Relief” to reward risk-taking and encourage high-growth entrepreneurs to remain and reinvest in the UK.

It’s envisaged that the relief will support founders and early investors and will come into effect for qualifying disposals made on or after 6 April 2027 and that it will apply if a business meets specific “high-growth, innovative” criteria allowing the business owners to access a 10% CGT rate up to £10m on the sale of their shares.

We will need to wait for a consultation (closing at the end November) to assist with designing the conditions that must be met for the new Founders’ Relief to apply and for the HMRC technical specifications and qualifying rules to be published for the detail of the precise eligibility criteria and timelines for the new Founders’ Relief including what ownership stake or other individual criteria will need to be met as an individual founder/early investor and what businesses will be classed as “high growth” or “innovative”.

From what we know so far, it appears that the new relief will mirror aspects of the historic “Entrepreneurs’ Relief” and current “Business Asset Disposal Relief” (BADR) that were/are applicable to qualifying sales of shares in companies, substantially expanding the lifetime limits previously available to qualifying business owners.

The key features of the new Founders’ Relief we know so far from the Chancellor’s announcement are:

BADR will remain an available option for qualifying individuals selling businesses that do not qualify for Founders’ Relief, creating a “two-track system”. However, John Healey announced that the lifetime limit for BADR is being halved from £1 million to £500,000 in relation to qualifying disposals made on or after 6 April 2027.

The Government have confirmed that there will be special provisions that apply to contracts entered before 6 April 2027 that have not been completed, and for certain share reorganisations and exchanges of securities not completed, before 6 April 2027.

Gains above this new £500,000 cap will be subject to standard CGT rates of up to 24% for higher-rate taxpayers. The maximum additional tax a person will pay due to the reduction of the BADR lifetime allowance is therefore £30,000.

While the Chancellor said that this threshold reduction will not affect three out of four BADR claimants, it disproportionality penalises small business owners, many of whom are relying on the business sale proceeds to fund their retirement and for whom the increased tax will be a significant sum.

These Budget announcements therefore appear to be good news for scale-ups but less so for many small businesses.

Further support for businesses

Alongside Founders’ Relief, the Chancellor announced several other measures to support start-ups, businesses and entrepreneurs with a particular focus on female entrepreneurs and hospitality including the following:

• Trading Allowance: Tripled from £1,000 to £3,000, meaning individuals can earn more tax-free from a “side hustle”.
• Young Entrepreneurs Allowance: A new scheme covering one year of living costs for young founders while they establish their businesses.
• Female Founders: The British Business Bank will double its funding commitments to women-led businesses to £200 million.
• Small Business Rates Relief: The threshold for most retail, hospitality, and leisure firms is increasing from £12,000 to £18,000, completely removing business rates for roughly half of those establishments.

If you require any advice or assistance in relation to the setup of or investment into or the sale of your business please contact the Kuits corporate team at [email protected] or call 0161 832 3434.