Founders' Relief offers 10pc CGT on £10m — but damage runs deep

Qualifying founders will pay a 10pc capital gains tax rate on up to £10m of lifetime gains from next April under the new Founders' Relief announced by John Healey. Sean Bannister, head of tax at law firm Edwin Coe, calls the measure welcome — but warns it arrives after serious damage has already been done to Britain's entrepreneur base.

Bannister, writing in The Telegraph, says the most concerning trend in his advisory work is how routinely client conversations about business sales and future plans now turn to leaving the UK.

"These aren't necessarily people who want to leave," he writes. Many have built successful businesses in Britain and hold strong personal, professional and commercial ties they would prefer to keep. The problem is timing: when founders approach a significant sale or liquidity event, the tax implications of staying become hard to ignore.

For context, £10m of gains taxed at 10pc rather than standard capital gains rates represents a saving that could run into millions for a founder exiting a high-growth company — enough, in principle, to change where they live after the sale.

What does Founders' Relief actually change?

Bannister has seen firsthand how capital gains tax changes influence three decisions: when founders sell, whether they reinvest the proceeds, and increasingly where they choose to live. The new relief could give founders a financial reason to remain in the UK after a sale and reinvest domestically, he argues.

That promise carries two caveats, and Bannister states both. First, the Government is still writing the eligibility rules for "innovative, high-growth" companies, and an attractive incentive can become unusable if its conditions turn complicated. Second, entrepreneurs planning several years ahead already face rules that shift without warning — so ministers' willingness to leave the measures alone will matter as much as their initial generosity.

The relief applies only to founders of qualifying companies, a definition the Treasury has yet to finalize. Until those details land, the £10m lifetime cap remains a headline figure without settled mechanics.

What is EMI2?

Alongside Founders' Relief, the Government is expanding the enterprise management incentives scheme — EMI — and renaming it EMI2, with more generous limits.

The existing scheme lets eligible companies grant staff tax-advantaged share options. For growing companies, Bannister notes, EMI has long served as a talent weapon: it lets startups offer employees a stake in the success they help create without matching the cash salaries of larger employers. The expanded limits should make that approach available more widely.

What the announcement does not include, according to Bannister's account, is any easing of the immigration constraints facing internationally mobile founders.

Can Britain win back mobile founders?

Bannister is blunt about the shift in his own practice. His firm used to do far more work advising people moving to the UK than those exploring departure; he would like that balance restored.

Tax alone will not do it, he argues. Founders also need confidence that the immigration system will let them build a life and a business in Britain over the long term. He calls for the Treasury and Home Office to work more closely together, with a straightforward investor visa as the starting point.

The UK retains real advantages: substantial financial and professional expertise, strong institutions and respect for the rule of law. Bannister says clients who tried life elsewhere returned because the London business environment — along with the city's cultural attractions — proved harder to replace than expected.

His closing argument cuts both ways: Britain should promote these strengths more confidently if it wants to grow and prosper. Implicit in that is the admission that Britain has not been doing so, and that the exodus conversation is now routine in founder advisory work.

The stakes are straightforward. A 10pc rate on £10m of gains takes effect next April; whether it actually keeps sellers in Britain depends on rules not yet written and a government record of sudden changes.