The Autumn Budget has delivered a mixture of good and bad news for entrepreneurs. A new 10% Capital Gains Tax relief could benefit founders of successful high-growth companies, but many established business owners face a reduction in the tax relief available when selling their businesses.

For business owners who have spent years building successful companies, selling the business is often one of the most significant financial decisions they’ll ever make.

It may represent the reward for decades of hard work, the funding for retirement or the opportunity to move on to another venture.

However, changes announced in the October 2026 Budget could substantially affect how much of the sale proceeds business owners get to keep.

The government has announced two major changes taking effect from 6 April 2027:

• A reduction in the lifetime limit for Business Asset Disposal Relief.
• A new Founders’ Relief offering a 10% Capital Gains Tax rate to qualifying entrepreneurs.

While the new relief has attracted considerable attention, the eligibility rules mean many ordinary owner-managed businesses may not benefit.

Let’s examine what the changes actually mean.

Business Asset Disposal Relief: The lifetime limit is being halved

Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief, allows qualifying individuals to pay Capital Gains Tax at a reduced rate when disposing of eligible business assets or shares.

For the 2026/27 tax year, qualifying gains are subject to Capital Gains Tax at 18%, up to a lifetime limit of £1 million.

From 6 April 2027, the government intends to reduce that lifetime limit to just £500,000.

The tax rate remains 18%, but the maximum amount of gains eligible for that preferential treatment will be halved.

Gains above the available lifetime limit will generally be subject to the normal Capital Gains Tax rates, potentially 24%.

What difference will this make?

Consider a business owner who sells their company and realises a qualifying capital gain of £1 million.

Assume they are a higher-rate taxpayer, qualify for BADR and have not previously used any of their lifetime allowance.

Selling before 6 April 2027:

• £1,000,000 qualifying gain
• Capital Gains Tax at 18%
• Total Capital Gains Tax: £180,000

Selling from 6 April 2027:

• First £500,000 taxed at 18%: £90,000
• Remaining £500,000 taxed at 24%: £120,000
• Total Capital Gains Tax: £210,000

That’s an additional £30,000 in Capital Gains Tax on exactly the same gain.

The example excludes the annual CGT exemption and assumes all eligibility conditions are met.

For business owners approaching retirement or negotiating a sale, £30,000 is not an insignificant amount of money.

The new Founders’ Relief: A 10% Capital Gains Tax rate

Alongside the reduction in BADR, the government has announced an entirely new relief.

Founders’ Relief is intended to encourage entrepreneurs to establish, develop and grow innovative UK businesses.

From 6 April 2027, eligible founders and significant early investors will potentially benefit from:

A 10% Capital Gains Tax rate on up to £10 million of lifetime qualifying gains.

That represents a considerably more generous outcome than the normal Capital Gains Tax rates.

However, the proposed qualification requirements are demanding.

This is not a general replacement for Business Asset Disposal Relief.

It is specifically targeted at founders of businesses that demonstrate substantial growth or innovation.

Who will qualify for Founders’ Relief?

The government has published a technical consultation setting out its proposed eligibility requirements.

These remain subject to final legislation.

1. A substantial shareholding from the beginning

The individual must generally have held at least 25% of the company’s ordinary share capital, together with the relevant voting and economic rights, when the company first began trading or preparing to trade.

This could exclude some founders who established businesses with multiple equal shareholders.

For example, five founders each holding 20% would not satisfy the proposed 25% requirement.

2. A minimum five-year holding period

The founder must generally have held the relevant shares for at least five years.

There are also proposed requirements concerning UK tax residence during the five tax years preceding disposal.

3. A substantial UK business

The company must satisfy UK Corporation Tax and substantial UK presence conditions.

It must also carry on an eligible trading activity.

Certain activities are excluded.

4. A business of significant scale

The proposed rules require the company to have achieved:

• At least £10 million of turnover.
• At least 15 qualifying full-time employees.

This alone will exclude a large number of smaller, successful owner-managed businesses.

5. Strong growth or innovation

The company must also satisfy at least two of three proposed growth or innovation tests.

These relate to:

• Compound turnover growth of at least 25% annually over the relevant three-period measurement.
• Compound employee headcount growth of at least 25% annually over the relevant measurement period.
• At least £1.5 million of qualifying research and development expenditure over the relevant three-year period, with the appropriate R&D tax relief claims.

Taken together, these requirements make Founders’ Relief particularly relevant to rapidly expanding technology, manufacturing and other innovative businesses.

A profitable, stable company may be extremely successful commercially without meeting the proposed criteria.

Example: A business sold for a £5 million gain

Let’s consider two entrepreneurs.

Both have built successful businesses and realise a capital gain of £5 million when selling their shares.

Entrepreneur A owns a well-established professional services business that has grown steadily over 20 years.

The company is profitable but does not meet the proposed Founders’ Relief growth or innovation conditions.

Entrepreneur B founded a rapidly expanding technology company that satisfies all the proposed qualifying conditions.

Assuming both are higher-rate taxpayers, have no previously used relief allowances and satisfy the relevant conditions, the illustrative tax liabilities could be:

	Entrepreneur A	Entrepreneur B
Capital gain	£5,000,000	£5,000,000
Relief available	BADR	Founders’ Relief
Tax on qualifying amount	£90,000	£500,000
Tax on remaining gain	£1,080,000	£0
Total CGT	£1,170,000	£500,000

Difference: £670,000.

This illustrates how dramatically the new relief could affect an eligible business sale.

However, the proposed qualification conditions are strict, and businesses falling just short of a threshold could receive no Founders’ Relief at all.

The actual tax due would also depend on the final legislation and the shareholder’s individual circumstances.

What about ordinary family businesses?

This is where the Budget raises an important question.

Not every successful business is a rapidly expanding technology company.

Many entrepreneurs spend decades building profitable businesses in sectors such as construction, hospitality, manufacturing, professional services and retail.

These companies employ people, pay taxes and contribute significantly to their local economies.

Yet they may never achieve the growth rates or research and development expenditure required for the new relief.

For those owners, the principal change may simply be the reduction in BADR from £1 million to £500,000.

In other words, their eventual exit could become more expensive.

Should you sell your company before April 2027?

If you’re already considering selling your business, the proposed changes make timing worth reviewing.

For an owner who qualifies for BADR but is unlikely to qualify for Founders’ Relief, completing a disposal before 6 April 2027 could potentially preserve access to the existing £1 million lifetime limit.

However, a business sale should never be rushed purely for a tax saving.

The sale price, buyer’s funding arrangements, commercial risks, payment terms and your future plans are all important.

The government has also announced anti-forestalling rules to prevent certain arrangements from artificially securing the old lifetime limit.

Simply signing a contract before the deadline may not be sufficient.

The position requires careful review.

Other important Budget changes for entrepreneurs

Although the two capital gains reliefs are the headline measures, business owners should also be aware of further developments.

Employee share incentives

The government has announced changes intended to make tax-advantaged employee share schemes more flexible.

These include changes to Enterprise Management Incentives and the Company Share Option Plan arrangements.

For growing businesses, share incentives can be an important way to attract and retain employees.

Company reorganisations and extracting capital

Further reforms are planned from April 2028 affecting the taxation of certain company distributions, capital repayments, reorganisations and share buybacks.

Some arrangements previously used to extract capital from businesses may become less attractive.

Business owners considering restructuring, bringing in a holding company or planning family succession should review these proposals carefully.

The wider cost of employing people

Increases to the National Living Wage and ongoing employer National Insurance costs will also affect business profitability and cash-flow planning.

It is therefore important to consider the Budget’s cumulative effect rather than looking only at Capital Gains Tax.

Five things business owners should consider now

1. Understand your current BADR position

Check whether you qualify, how much lifetime relief you have previously used and whether your shares satisfy the relevant conditions.

2. Review your likely business exit value

A business worth considerably more than £500,000 may require different planning from one where the expected gain is below the new threshold.

3. Consider whether Founders’ Relief could apply

If your business has experienced substantial growth or invested heavily in innovation, test your circumstances against the proposed rules.

4. Review the timing of any planned sale

Where an exit is already under consideration, understand the tax implications of completing before or after 6 April 2027.

5. Consider succession and restructuring plans

If you intend to pass your company to family members, reorganise shareholdings or introduce new investors, take advice before making changes.

How williams lester accountants can help

At williams lester accountants, we work with entrepreneurs, shareholders and company directors throughout the business lifecycle.

We believe successful business planning should consider the eventual exit long before a buyer appears.

Whether you’re thinking about retirement, selling your company, introducing shareholders or developing an exit strategy, we can help you understand the financial implications and available options.

Our support includes:

• Reviewing Business Asset Disposal Relief eligibility.
• Modelling potential Capital Gains Tax liabilities.
• Considering the impact of the new Founders’ Relief proposals.
• Planning director and shareholder remuneration.
• Reviewing business valuations and succession arrangements.
• Working with specialist advisers on company sales and reorganisations.

Built a successful business? Make sure you understand what you’ll keep when you eventually sell it.

With significant tax changes scheduled for April 2027, planning ahead could make a substantial financial difference.

Book a discovery call with williams lester accountants.

This article reflects announcements made in the October 2026 Budget and government publications available on 2 November 2026. Founders’ Relief remains subject to consultation, and the proposed legislation and anti-forestalling provisions should be reviewed before undertaking any transaction.