UK Budget offers startup founders a 10% capital gains tax rate on up to £10 million

Founders and significant early investors who sell shares in fast-growing UK companies would pay capital gains tax (CGT) at 10% on up to £10 million of lifetime gains, under a relief the UK government announced in its Budget on October 28, 2026. HM Treasury opened a technical consultation on the design of Founders' Relief the same day. It runs until November 30, 2026. The relief would apply to sales made on or after April 6, 2027, with legislation in the Finance Bill 2026/27.

The limit applies per person, so several founders of the same company could each claim. Only individuals can claim, through their Self Assessment tax return.

Who would qualify

The proposed rules are narrow. They target founders whose companies have already grown, not first-time sellers of small firms:

• The individual must have held 25% of the company's ordinary shares when its trade, or preparation for it, began, and must have held the shares for at least five years before selling.
• The individual must have been UK resident for at least five continuous tax years before the sale.
• The company must be a trading company with a substantial UK presence for the five accounting periods before the sale, still carrying on the trade it was set up for.
• In the accounting period before the sale, the company must have turnover of at least £10 million and at least 15 qualifying full-time employees.
• It must also pass two of three tests: average annual compound growth of 25% in turnover, or 25% in headcount, over three consecutive accounting periods in the 10 years before the sale; or at least £1.5 million of qualifying research and development (R&D) spending, with R&D tax relief claimed for accounting periods ending in the three years before the sale.

Activities excluded from the existing Enterprise Investment Scheme, such as dealing in land, financial services and property development, would not count. Amounts already claimed under Business Asset Disposal Relief and Investors' Relief would reduce the £10 million limit from April 6, 2027.

How the rate compares

For a founder who would otherwise pay 24%, gains of £10 million would cost £1 million in CGT at the new rate instead of £2.4 million, a saving of up to £1.4 million before allowances, by our calculation. The government says it will monitor whether the relief actually influences founders' decisions to establish, scale or expand their companies.

More money for the British Business Bank

The Budget raises the British Business Bank's total financial capacity by £5 billion, or a fifth, to £30.6 billion. Within that, a £2 billion expansion includes £1.4 billion more to invest in equity funds and £450 million for a new venture debt product, meant to let scale-ups raise money without founders and shareholders giving up more equity than necessary.

In a letter to the bank, the Chancellor of the Exchequer and the Secretary of State for Business, Innovation, Science and Trade said they expect up to £900 million of the uplift to back defense and dual-use technologies, nearly doubling its capacity in that area over five years. The letter says the bank must keep investing on a commercial basis and make its own investment decisions.

The government's prospectus, titled Entrepreneurship in the UK: Start. Scale. Stay., gives one reason for the push: it says foreign investors supplied 74% of the value of UK venture capital investment in 2025, and around three-quarters in rounds of $100 million or more.

Bigger employee share options

From April 2027, the limit on options an employee can hold under the Company Share Option Plan (CSOP) doubles from £60,000 to £120,000. CSOP will be renamed EMI2, and the £250,000 combined cap with the Enterprise Management Incentive (EMI) is being removed, so an employee could hold up to £370,000 across both. About 4,840 companies used EMI in 2024-25, granting options to roughly 42,000 employees. For how startup rounds and share deals work, see our startup funding explainer.

What comes next

The consultation asks whether the founder and company conditions will work in practice, whether there are better ways to identify innovative companies than the R&D test, and how claimants can get the company records they need. The government's preferred option is a legal right for claimants to request that information from the company. HM Treasury will use the responses to finalize the design before legislating.