Britain’s startup founders have welcomed a sweeping package of tax breaks in John Healey’s first Budget, but investors warned that the Chancellor’s attempt to keep the country’s most promising businesses at home will fall short without more capital to help them grow.

At the centre of Wednesday’s announcement was a new Founders’ Relief, offering entrepreneurs a 10 per cent capital gains tax rate on up to £10m of lifetime gains when selling qualifying shares.

The move marks a significant reversal of years of increasingly punitive tax treatment for entrepreneurs, which had fuelled concerns that Britain was becoming a less attractive place to build and sell a business.

“Entrepreneurs and founders will breathe a sigh of relief after today’s Budget”, said Brent Hoberman, co-founder of Founders Forum Group.

“Founders’ Relief, in particular, is something we’ve long been calling for and will encourage our best entrepreneurs to start and stay in Britain”.

However, the Chancellor simultaneously halved the lifetime allowance for Business Asset Disposal Relief (BADR), from £1m to £500,000, leaving entrepreneurs outside the new scheme with less generous treatment.

The Treasury says three-quarters of existing claimants will be unaffected, while the new relief will target founders and significant early investors in high-growth, innovative British companies.

Exactly who qualifies remains undecided, with a consultation running until 30 November and the scheme due to take effect in April 2027.

A welcome U-turn

For founders who have watched successive governments chip away at their tax incentives, the announcement was a marked change in direction.

Andy Aitken, co-founder and chief executive of Honest Mobile, called it an “incredible budget for Founders in the UK”.

“After years of what felt like going backwards”, he wrote on Linkedin, the government had finally recognised the importance of rewarding entrepreneurs.

The changes follow years of uncertainty over capital gains tax, which has weighed heavily on founders making long-term decisions about where to build their companies.

Before the Budget, Liam Houghton, chief executive of photo technology firm Popsa, told that repeated speculation over tax changes was damaging confidence.

“This constant kiteflying is no way to run an economy”, he said, calling for the restoration of a £10m lifetime allowance.

Healey has now delivered something close to that demand, although only for businesses meeting the new relief’s eligibility requirements.

Dame Anne Glover, chief executive of venture capital firm Amadeus Capital Partners, said the changes presented a mixed picture.

“The new founders’ relief is welcome, but the reduction in Business Asset Disposal Relief creates a mixed picture for entrepreneurs”, she said.

“The test of this Budget will be whether the overall package materially improves the conditions in which innovative British companies can commercialise their technology, attract long-term investment and scale from the UK”.

Healey’s wider package also included a tripling of the tax-free trading allowance to £3,000, a new allowance covering a year’s living costs for young entrepreneurs and expanded employee share options to help startups compete for talent.

The British Business Bank will double its commitments to women-led businesses and funds to £200m, while reforms to skilled worker visas and non-compete clauses are intended to make recruitment easier.

“Too often, we invent the technologies the world wants here in the UK, then see the jobs and the profits go somewhere else”, Healey told MPs.

Yet the central problem facing British startups is not necessarily the tax they pay when they succeed. It is finding the money to get there.

Research from venture capital firm Antler found that just 9.2 per cent of British seed-stage startups progress to Series A funding, compared with 18.9 per cent in Germany.

Adam French, a partner at Antler, told ahead of the Budget that the transition between those funding rounds should be the government’s priority.

“Founders don’t move abroad because of the CGT rate, which is about right as it stands. They leave when the rules become complicated or keep changing”, he said.

The Chancellor pledged further support for scale-up funding through the British Business Bank and National Wealth Fund, but stopped short of the more substantial pension investment reforms sought by venture capital firms.

Glover warned that voluntary efforts to channel British pension savings into domestic startups had delivered little, with overseas pension funds investing around 16 times more into UK private capital funds than British schemes.

Hoberman also called for further changes, including tax relief for founders who reinvest the proceeds of a business sale into another startup.

“The direction is right”, he said. “But the details will decide how much this moves the needle for builders”.