Chancellor John Healey's first Budget introduces Founders' Relief, a 10% capital gains tax rate on qualifying share disposals up to a £10m lifetime limit per individual, while halving the Business Asset Disposal Relief allowance from £1m to £500,000.
The relief, announced on Wednesday, is the most significant change to the tax treatment of founder equity in several years. It targets founders and significant early investors in high-growth, innovative British companies, the group that sits at the top of most early-stage cap tables and has borne the brunt of successive cuts to entrepreneurs' reliefs.
Under the proposal, gains on qualifying disposals of shares will be taxed at 10% until an individual reaches £10m of lifetime gains. The government has opened a consultation, running until 30 November, on the individual, company and "growth and innovation" conditions that will decide who qualifies. The scheme is due to take effect in April 2027.
The trade-off
The new relief arrives alongside a cut elsewhere. The lifetime allowance for Business Asset Disposal Relief (BADR) falls from £1m to £500,000, leaving owners of businesses that fall outside the new scheme with less generous treatment on exit. The Treasury says three-quarters of existing BADR claimants will be unaffected.
For cap tables, the distinction matters. Founders and early angels in venture-backed companies that meet the eligibility tests stand to gain, while those selling more conventional trading businesses will see their 10% band shrink by half.
The wider package
Healey paired the relief with an expansion of employee share options, referred to as EMI2, intended to help startups compete for talent by widening equity ownership beyond the founding team. The tax-free trading allowance for new ventures triples from £1,000 to £3,000, and a new young entrepreneurs' allowance will cover a year of living costs for young founders.
The British Business Bank will double its commitments to women-led businesses and funds to £200m, and a scale-up programme for female founders was also announced. Reforms to skilled worker visas and non-compete clauses are aimed at easing hiring.
Industry response
Startup Coalition executive director Dom Hallas described the package as the boldest action for startups and scale-ups from any government in years. Founders Forum Group co-founder Brent Hoberman said the relief was something the group had long lobbied for, but called for further relief for founders who reinvest exit proceeds into a new company, a point also raised by AlbionVC partner Robert Whitby-Smith.
Investors were more cautious on capital supply. Amadeus Capital Partners chief executive Dame Anne Glover called the overall picture mixed given the BADR cut. AlbionVC said it was disappointed there was no reversal of the reduced income tax relief on venture capital trust investments, which fund many of the early-stage companies the Budget aims to support.
What's next
The detail now rests on the consultation. How tightly the growth and innovation conditions are drawn, and whether significant early investors are defined broadly enough to include angels and seed backers, will determine how much of the typical UK venture cap table falls inside the 10% band when the relief starts in April 2027.
Original source: City AM — https://www.cityam.com/sigh-of-relief-as-healey-woos-british-founders-with-10m-tax-break/ (additional reporting: Tech.eu — https://tech.eu/2026/10/28/founders-relief-among-string-of-measures-introduced-in-budget-to-encourage-entrepreneurs-to-build-in-britain/; BusinessCloud — https://businesscloud.co.uk/news/budget-businesses-back-founders-relief-announcement/)
