Budget 2026: entrepreneurs' relief halved from April 2027, and who qualifies for the new 10% Founders' Relief

Updated 28 October 2026, with the full Budget detail.

The Chancellor has halved the main tax relief used by owners selling their business, and introduced a new, more generous relief that most owner-run businesses won’t qualify for. The good news is that the cut doesn’t take effect until April 2027.

Business Asset Disposal Relief: halved from April 2027

For disposals on or after 6 April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) falls from £1 million to £500,000. The rate stays at 18%.

At today’s rates, that cuts the maximum lifetime saving from around £60,000 to £30,000 for a higher-rate taxpayer. The Chancellor said three in four people who claim BADR will see no change, because their gains are under £500,000.

Special rules will apply to some contracts and share reorganisations entered into before the change, so if you’re agreeing a deal that might complete after 6 April 2027, check the detail with your adviser.

Founders’ Relief: generous, but narrow

A new Founders’ Relief will tax gains of up to £10 million at 10% from 6 April 2027. Compared with the 24% higher rate, that could save more than £1 million on a large sale.

But it’s aimed at founders and early investors in high-growth, innovative companies, and the proposed conditions are demanding.

The seller must have:

• held at least 25% of the shares when the company started trading
• held the shares for at least five years before the sale
• been UK resident for at least five continuous tax years

The company must have:

• carried on the same trade throughout
• turnover of at least £10 million
• at least 15 full-time employees, not counting directors, contractors or agency staff
• spent at least £1.5 million on qualifying research and development and claimed R&D relief for it, within the three accounting periods before the sale

The design is subject to a consultation closing on 30 November 2026, so the details could still change.

What it means for owner-run businesses

For most owners of established businesses in sectors such as trades, care, distribution and professional services, the R&D test alone will rule out Founders’ Relief. For them, the Budget is simply a cut to BADR.

If your gain is under £500,000, nothing changes.

If your gain is over £500,000, you’ll pay up to £30,000 more tax if you sell on or after 6 April 2027 than if you sell before.

If your business is innovative and growing, with significant R&D spending, Founders’ Relief could be far more valuable than BADR ever was, and it may be worth waiting until after April 2027.

What to do

1. If you’re already planning a sale in the next year, talk to your adviser now about timing. Completing before 6 April 2027 keeps the full £1 million limit, but that’s only around five months away, and deals take time.
2. Don’t rush a sale for tax reasons alone. A weaker deal done quickly can easily cost more than £30,000.
3. Check whether you’ve claimed BADR before, as previous claims count towards the lifetime limit.
4. If your business invests heavily in R&D, look at whether you could meet the Founders’ Relief tests, and consider responding to the consultation.

Read more: What is my business worth? How buyers value a UK company and Business owner loses tax relief over how her shares were recorded

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Sources: HM Treasury, Budget 2026; ICAEW; Hazlewoods; Vinson & Elkins. Exit Index provides general information, not financial, legal or tax advice.