Autumn Budget 2026: what it means for founders

A year ago, founders went into the Budget worried about an exit tax. This year, they came out with a tax break for staying.

That’s a big change in a year. But most of what’s good in this Budget pays out once a company has scaled. It does very little for the stage most of you are at right now: raising at pre-seed and seed.

Founders’ Relief: a reward for building here

From 6 April 2027, founders and early investors in high-growth UK companies will pay 10% capital gains tax on up to £10m of lifetime gains [1][2]. The higher rate of CGT stays at 24%, so the rise many feared didn’t happen.

We’ve long argued at ThatRound that tax policy shapes where founders choose to build. Rather than penalising founders who leave (which they’ve teased more than once), the government is rewarding those who build here and stay, and that’s now written into the tax code. Dom Hallas, executive director of Startup Coalition, put it simply: “today is a better day to be building an innovative company in Britain than yesterday” [9].

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Who Founders’ Relief is really for

The conditions are where it gets harder. Under the technical consultation, you’d need to have held at least 25% of the shares from the start, kept them for five years and been UK resident throughout. The company needs at least £10m turnover and 15 full-time employees before a sale, and must pass two of three tests on turnover growth, headcount growth and R&D spend [2]. As Philip Salter, founder of The Entrepreneurs Network, put it, “the technical consultation points towards a very narrow definition” [8].

For most pre-seed and seed founders, that’s years away. Once they read the detail, many will realise they’re unlikely to qualify, so it probably won’t change the minds of founders already thinking about leaving. It certainly won’t change who writes a cheque this year.

It also leaves people out. Larger founding teams can start below the 25% line, and a CEO who joins after launch never qualifies. Founders selling a smaller business fall back on BADR, and innovative companies that don’t spend heavily on R&D would need to pass both growth tests. Angels with smaller stakes get nothing, so it isn’t really an investor incentive, though it may make them look more closely at founders who keep a meaningful stake early on.

And despite the stated aim of reinvesting “into the next generation of founders”, there’s no reinvestment condition [2].

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The smaller exit just got smaller

The relief most founders could actually use is Business Asset Disposal Relief (BADR). From April 2027, its lifetime limit halves from £1m to £500k, with the rate staying at 18% [3].

The Chancellor says three in four claimants won’t see a change [3][4]. That’s a count of people, not of value. The quarter it does affect have larger exits, and they’re the founders most likely to recycle their gains into the next generation of startups. Side by side, the two reliefs start to look like two tiers: a generous one for the few that scale, and a thinner one for everyone else. It feels like taking from some founders to give to others.

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What’s useful for founders right now

There’s plenty here that helps sooner. CSOP becomes EMI2, with the individual option limit doubled to £120k and the combined cap with EMI removed, giving you more room to use equity to hire [5][8]. The government will also stop non-compete clauses holding back startup hiring, widen the High Potential Individual visa and extend the Graduate visa to two years [1][5].

For first-time founders, the trading allowance triples from £1,000 to £3,000, and a new Young Entrepreneurs Allowance will cover a year of living costs for young founders getting started [4], which could widen the pipeline. R&D claims get simpler too: the Claim Notification Form is scrapped, and HMRC will modernise Advance Assurance and act on excessive fees, both things we’ve called for [5].

The British Business Bank gets a £2bn uplift, including a new venture debt product and more commercial fund investment, and will double its commitments to women-led businesses and funds to £200m [4][6]. That should help newer funds close, which matters if you’re looking for investors who back companies at your stage.

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What’s still missing for early-stage capital

Last year, we set out what founders should be asking for from the Budget. The early-stage capital asks didn’t get much. Founders’ Relief and EMI2 help people scale and stay, but do nothing equivalent for capital. SEIS limits and the six-month advance subscription agreement window are unchanged. VCT income tax relief stays at 20%, so the expected squeeze on late seed and Series A money still lands. The British Business Bank money is welcome, but it isn’t the pension unlock we’ve asked for: pension capital gets an FCA consultation on performance fees instead [5]. Salter also made a point that will ring true for a lot of founders: “the Budget ducks the cost and risk of employing people, founders’ current number one issue” [8].

When founders are celebrating CGT not going up, and an exit tax has to be ruled out early for the second year running, not making things worse has quietly become the win. A sad state of affairs.

My bigger worry is the backdrop. Inflation was 3.5% in September and is expected to peak at 3.8% early next year, and government borrowing costs are close to their highest in decades [7]. That means cautious investors, rising costs and soft consumer confidence for a while yet, and nothing in this Budget changes that.

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What it means for your raise

If you’re raising in the next 12 months, the Budget doesn’t make it easier. Investors will stay careful, and late seed in particular will stay tight. CGT stability does at least remove the reason some angels had to bring sales forward or hold back. And with a smaller BADR cushion for modest exits, the size of the opportunity will matter even more in investor conversations.

When capital is cautious, the founders who move fastest tend to be the ones talking to investors who already back companies like theirs, rather than working through a long list of cold names. That’s the problem we’re building ThatRound to solve, and this Budget makes it more relevant, not less.

One thing worth doing this month: the Founders’ Relief consultation is open until 30 November [2]. If the 25% test, the £10m threshold or the drop to a £500k BADR limit would affect you, say so. Worth asking for: a route for smaller scaled exits, fairer treatment of larger founding teams and later-joining CEOs, a reinvestment route, and innovation tests that don’t rely on R&D claims. It’s the one place where the detail can still change.

The rewards for building a big company in the UK have got better. Getting there hasn’t got much easier yet, and that’s where founders will need the most support over the next year.

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References

1. Budget 2026: breathing space for today, hope for the future | GOV.UK — https://www.gov.uk/government/news/budget-2026-breathing-space-for-today-hope-for-the-future
2. CGT Founders’ Relief: technical consultation | HM Treasury — https://assets.publishing.service.gov.uk/media/6ae1c5487fe45a08a4036e4d/CGT_Founders__Relief_-_technical_consultation.pdf
3. Capital Gains Tax: new Business Asset Disposal Relief lifetime limit | HM Treasury and HMRC — https://www.gov.uk/government/publications/capital-gains-tax-reduction-in-the-business-asset-disposal-relief-lifetime-limit/capital-gains-tax-new-business-asset-disposal-relief-lifetime-limit
4. Budget 2026 speech | GOV.UK — https://www.gov.uk/government/speeches/budget-2026-speech
5. Entrepreneurship in the UK: Start. Scale. Stay. Prospectus | HM Treasury — https://www.gov.uk/government/collections/budget-2026-in-full
6. Chancellor’s letter to the British Business Bank | HM Treasury — https://assets.publishing.service.gov.uk/media/6ae0a01d7cf9b22489046773/Chancellor_letter_to_British_Business_Bank.pdf
7. Budget 2026 | HM Treasury — https://assets.publishing.service.gov.uk/media/6ae20b85460c1346f7be784e/E03668986_HMT_Budget_2026_ELAY__2_.pdf
8. Autumn Budget 2026 | The Entrepreneurs Network — https://tenpolicyupdates.substack.com/p/autumn-budget-2026
9. The Budget 2026 | Startup Coalition — https://startupcoalition.substack.com/p/the-budget-2026