Founders Relief set at 10% as BADR limit halved to £500,000
John Healey has created a new 10 per cent capital gains rate on lifetime gains up to £10m, and cut the Business Asset Disposal Relief limit in half. Where your exit lands now depends on its size.
Chancellor John Healey told MPs on 28 October that a new Founders Relief will charge 10 per cent capital gains tax on lifetime gains of up to £10m.
At the same time he halved the lifetime limit for Business Asset Disposal Relief from £1m to £500,000.
BADR charges 18 per cent on qualifying gains made from 6 April 2026, according to HMRC guidance.
Healey said the relief was meant for "the founders of our most successful firms". He said the BADR cut would mean "no change for three in four claimants".
That is the split. A founder selling for a few hundred thousand is untouched. A founder whose gain sits between £500,000 and £1m loses relief on the top half of it. A founder clearing several million stands to pay 10 per cent on far more than before — if they qualify.
Qualification is the part nobody can price yet. Michael Carter, head of incentives at Osborne Clarke, said the key question is who will qualify and how the relief works in practice, and that the detail will decide it.
Robert Birchall, tax partner at Charles Russell Speechlys, said the BADR lifetime limit has fallen significantly since 2020, and that each cut erodes the payoff for entrepreneurs and for employees holding EMI options.
Healey also said he was changing "outdated rules so that people taking profits out of their companies are taxed consistently", while protecting genuine commercial transactions and families passing businesses to the next generation.
For firms nowhere near an exit, the smaller measures matter more. The trading allowance — tax-free earnings from a new venture — triples from £1,000 to £3,000.
A young entrepreneurs allowance will cover a year of living costs for young founders while they build. An EMI 2 scheme will double the generosity of the company share option plan.
Skilled worker visas and non-compete clauses are to be reformed so that people who help build one successful company can move on to the next, the Chancellor said.
A scale-up programme for female founders follows a recommendation from the Women in Tech Task Force. The British Business Bank will double its commitments to women-led businesses and funds to £200m.
Healey said high-growth firms are less than 1 per cent of small and medium-sized businesses but generate more than half the output. The package is aimed squarely at that 1 per cent.
The timing is awkward. Alex Depledge quit as the Treasury's entrepreneurship adviser three days before the Budget, saying ministers treated founders and innovation as a sideshow.
James Crouch, head of policy and public affairs at pollster Opinium, said 57 per cent of entrepreneurs report it is harder to start a business than it was 10 years ago, and 48 per cent of those blame higher business taxes and operating costs.
The practical question for anyone with a sale in progress: whether the deal clears under the old £1m BADR limit, and whether Founders Relief will be open to them if it does not. Neither the qualifying conditions nor a start date for the new relief have been published.