Chancellor John Healey today announced a new capital gains tax relief for business founders, charging 10 per cent on lifetime gains of up to £10m, while halving the lifetime limit for Business Asset Disposal Relief (BADR) from £1m to £500,000.
Healey told MPs the Founders Relief was intended for “the founders of our most successful firms”.
“I believe that when business founders take that risk, build an exceptional company, create wealth for Britain, we should recognise that success and keep those people here to invest again,” he said.
The Chancellor said the BADR cut would mean “no change for three in four claimants”. The relief currently charges 18 per cent on qualifying gains made from 6 April 2026, according to HMRC guidance.
Healey also said he was changing “outdated rules so that people taking profits out of their companies are taxed consistently”, while protecting genuine commercial transactions and families passing their businesses to the next generation.
Measures for start-ups
The trading allowance, the amount that can be earned from a new venture tax-free, will triple from £1,000 to £3,000. A new young entrepreneurs allowance will cover a year of living costs for young founders while they develop their businesses.
Healey said a new EMI 2 scheme would double the generosity of the company share option plan, and that skilled worker visas and non-compete clauses would be reformed so that people “who help build one successful company can move easily on to the next”.
Following a recommendation from the Women in Tech Task Force, a scale-up programme for female founders will be launched, and the British Business Bank will double its commitments to women-led businesses and funds to £200m.
High growth firms make up less than 1 per cent of small and medium-sized businesses but generate more than half the output, the Chancellor said.
The announcements come after Alex Depledge quit as the Treasury’s entrepreneurship adviser on Saturday, saying ministers treated founders and innovation as a sideshow.
Reaction
Michael Carter, partner and head of incentives at Osborne Clarke, said: “The key question is who will qualify and how the new relief will work in practice. If it is sufficiently accessible, this could be welcome news for entrepreneurs and help encourage further investment. But as ever with tax changes, the devil will be in the detail.”
Robert Birchall, tax partner at Charles Russell Speechlys, said: “Since 2020, the BADR lifetime limit has fallen significantly, and each cut erodes the payoff for entrepreneurs who take the risk of building a business in the UK and employees who receive EMI options.”
James Crouch, head of policy and public affairs at Opinium, said: “Nearly three in five (57%) entrepreneurs say it is more difficult to start a business than it was 10 years ago, with half (48%) of those blaming higher business taxes and operating costs.”
Jamie Young
Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the 'covid era' and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine's coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk
