Budget reaction - Shaun Davison

In some ways it’s back to the future with the introduction of Founder’s Relief – but with strings attached.  The new relief, which provides for a reduced capital gains tax rate of 10% on lifetime gains for entrepreneurs, is similar in some ways to the current Business Assets Disposal Relief, which was also available on the first £10 million of gains when it first came in, but which from April 2027 will be restricted to just £500,000, at a rate of 18%.

The new Founders’ Relief is squarely aimed at high-value growth, innovative businesses, rather than all entrepreneurs.  The conditions attached are quite stringent: founders must have held at least 25% of the shares since the company started trading, and must have held them for at least five years. 

In addition, the company must have a turnover of at least £10 million and employ at least 15 full-time staff, as well as meeting demanding growth and/or innovation tests.  This means that many traditional SMEs, family-owned businesses and owner-managed companies are unlikely to qualify.

The new relief is firmly focussed on businesses demonstrating significant scale, growth and innovation – all line with the government’s focus on growth, but excluding many other smaller businesses which are also engines of growth within the economy.