Chancellor John Healey announced a new capital gains tax relief for qualifying company founders and reduced the lifetime limit on a separate business relief in his first Budget on Wednesday 28 October 2026. The measures move in opposite directions.
The Budget material does not support the headline’s claims that 600 people will benefit or that 10,000 will pay more. It gives neither figure, and it does not announce a general rise in the tax rate.
Instead, the government paired a lower rate for some founder gains with a smaller cap for Business Asset Disposal Relief (BADR). The Chancellor said the cap change would mean “no change for three in four claimants.”
The measures address separate groups. Eligibility rules for the new founder relief have not been set out in detail.
Founders and existing relief claimants face different limits
The Budget gives the clearest distinction through the two lifetime limits and their tax treatment. Its stated figures are:
| Group | Budget measure | Announced limit or rate |
|---|---|---|
| Qualifying company founders | Founders Relief applies a lower rate to lifetime gains | 10 per cent on gains up to £10m |
| BADR claimants | Lifetime limit cut from £1m | £500,000 |
| Claimants affected by the lower BADR cap | Chancellor’s estimate of those with no change | Three in four claimants |
The Chancellor described the founder measure as intended for “the founders of our most successful firms.” He said the government should recognise founders who build companies and create wealth, and encourage them to invest again in Britain.
The new relief’s qualification tests will determine who can use the lower rate. The Budget announcement did not provide those detailed rules. BADR, by contrast, is an existing relief whose lifetime ceiling has been reduced.
The Chancellor also said he would update rules he called outdated, with the aim of taxing company profit withdrawals consistently. He said the government would protect genuine commercial transactions and families passing businesses to the next generation.
The Budget added founder allowances and company support
The trading allowance will rise from £1,000 to £3,000. A new young entrepreneurs allowance is intended to cover a year of living costs while young founders develop their businesses.
The government also announced EMI 2, a scheme designed to double the generosity of the company share option plan. It plans changes to skilled worker visas and non-compete clauses, saying people who help build one successful company should be able to move to another.
A scale-up programme for female founders will follow 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.
The Chancellor said high-growth firms account for less than 1 per cent of small and medium-sized businesses but generate more than half their output. Alex Depledge resigned as the Treasury’s entrepreneurship adviser on 24 October, saying ministers treated founders and innovation as a sideshow.
The Budget followed pressure over whether to raise the headline rate
Before the Budget, CGT stood at 18% for basic-rate income-tax payers and 24% for higher- and additional-rate payers. The top income-tax rate is 45% in England, Wales and Northern Ireland. HMRC guidance says BADR applies at 18 per cent to qualifying gains made from 6 April 2026.
HMRC estimated that raising the higher CGT rate by 10 percentage points would reduce receipts by £3.6bn in 2028-29 because of behavioural changes. That estimate was a projection for a specific rate increase, not a measure of tax already lost.
Wes Streeting, the defence secretary, and Louise Haigh, the first secretary of state, had both backed raising CGT before Andy Burnham became prime minister. Haigh had called for rates to move “closer to income tax rates.” Streeting had supported an increase while leaving open lower rates for entrepreneurs.
Lord O’Neill of Gatley, a former Goldman Sachs chief economist who advised Burnham and worked on the Northern Powerhouse project, argued against a rise. He told the Times: “If this is what happens it's eminently sensible and just what's needed to keep the improving momentum in the economy going. As I have said a number of times, raising capital gains tax would send very much the wrong message to business.”
Caitlin Boswell, deputy director at Tax Justice UK, criticised the reported decision not to raise rates as a missed opportunity. Before the Budget, the Treasury declined to comment on speculation. A spokesman said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
Public and political pressure pointed in opposing directions
Ipsos polling of 1,077 Britons conducted between October 9 and 12 found that 67% thought the Chancellor was doing neither a good nor bad job. Another 65% expected some form of tax rise in the Budget.
Green MP and Treasury spokesperson Dr Ellie Chowns criticised the prospect of a business-as-usual Budget. The Greens proposed aligning CGT with income tax as part of measures they said would raise over £60 billion. Conservative leader Kemi Badenoch was due to urge the government to “live within our means” and promote a £70bn spending-cut package, including welfare and Civil Service headcount reductions.
Dale Vince, a Labour donor, argued that aligning CGT with income tax could raise £14billion. The political debate therefore extended beyond the founder measures announced in the Budget.
Michael Healy, chief executive of IG Consumer, said repeated tax changes and proposals had created uncertainty for investors. He welcomed reports before the Budget that the Chancellor would not raise the rate. Rob Morgan, chief investment analyst at Charles Stanley Direct, said avoiding a rise could reassure business owners and investors, while higher rates might prompt people to delay selling assets and reduce the tax ultimately collected.
Sarah Coles, head of personal finance at AJ Bell, warned that some investors might hold assets longer rather than sell, even when those investments no longer suited their needs. She said: “It could lead them to hang onto investments that don't suit their needs, resulting in poor financial outcomes.”
Qualification details remain the next test for the founder measure
Michael Carter, partner and head of incentives at Osborne Clarke, said access to the relief would shape its value to entrepreneurs. He 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 repeated BADR limit cuts had reduced the payoff for entrepreneurs and employees with EMI options. He said the lifetime limit had fallen significantly since 2020.
James Crouch, head of policy and public affairs at Opinium, said 57% of entrepreneurs found starting a business more difficult than it was 10 years ago. Of those respondents, 48% blamed higher business taxes and operating costs.
