Founders and early investors in high-growth, innovative UK companies could benefit from a lower Capital Gains Tax (“CGT”) rate when selling qualifying shares or securities from 6 April 2027.
The proposed Founders’ Relief is aimed at those who have helped build and grow these businesses over the long term. The detail is subject to technical consultation, closing on 30 November 2026, with legislation to follow in Finance Bill 2026–27.
The lifetime limit for Business Asset Disposal Relief (“BADR”) will reduce from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. Special provisions will apply to certain contracts entered into before 6 April 2027 and certain share reorganisations and exchanges.
The Government will proceed with reforms to the taxation of distributions and repayments of capital from companies, with the changes taking effect from April 2028. The reforms are intended to provide a clearer and more consistent framework for taxing distributions to individual shareholders, regardless of the legal form, residence of the company or structure of the transaction.
The reforms are designed to preserve capital treatment where there is a genuine change in ownership, including family succession, and in some cases will make relief more generous for demergers. The Government will continue to engage with stakeholders on the technical detail, with draft legislation expected to be published for consultation in 2027.
Northern Ireland has a strong tradition of owner-managed and family businesses, many of which have been built and grown over generations.
The Budget contains a number of measures which will be relevant to business owners at different stages of that journey, from establishing and growing a business through to ultimately realising value or passing it to the next generation.
A clear theme from the Budget was the desire to encourage entrepreneurs to establish and grow their businesses in the UK. The introduction of Founders’ Relief sits naturally within that ambition.
For qualifying founders of high-growth, innovative businesses, a 10% Capital Gains Tax rate on qualifying lifetime gains of up to £10 million provides a potentially valuable incentive to build and retain value in their businesses.
For owners of more established businesses, Business Asset Disposal Relief (“BADR”) remains an important consideration when thinking about an eventual exit. The reduction in the lifetime limit from £1 million to £500,000, following the increase in the BADR rate to 18%, means that the relief will play a smaller role in mitigating the Capital Gains Tax cost of a future disposal.
For business owners, the practical message is therefore one of understanding the tax implications of an exit as part of their wider planning, alongside the commercial considerations that will ultimately drive any transaction.
Of course, an exit does not necessarily mean a sale to a third party. For many established owner-managed businesses in Northern Ireland, the next phase of ownership may involve existing management, the next generation or another form of ownership transition. The proposed modernisation of the distributions framework will therefore be an area to watch closely.
The reforms seek to introduce greater consistency in how transactions between companies and their individual shareholders are taxed, while preserving capital treatment where there is a genuine change in ownership.
This broader focus on changes of ownership is particularly relevant for business owners considering how the business should evolve beyond their own period of ownership. With the detailed legislation still to come, understanding how the new framework interacts with those longer-term plans will be important ahead of its introduction in April 2028.
Taken together, the measures highlight the different questions that arise throughout the lifecycle of an owner-managed business. For founders, that may be how to establish, grow and scale a business successfully.
For established owners, the focus may turn to how value is ultimately realised, how ownership will evolve and who will lead the business through its next chapter.
For Northern Ireland's owner-managed businesses, the Budget therefore provides plenty to consider, whether the next chapter involves further growth, a change in ownership or an eventual exit.
The measures unveiled in the UK Autumn Budget will have far-reaching implications for businesses across Northern Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.
Contact Paddy Doherty and Sarah McGarrity of our Tax team today.
