Britain’s new tax break for company founders is a “dreadful” way to support entrepreneurship, the head of the Institute for Fiscal Studies has told MPs, in a blunt challenge to one of the government’s flagship measures for keeping fast-growing firms in the country.
From April, the “founders’ relief” will offer qualifying founders of high-growth companies a reduced capital gains tax rate of 10 per cent on up to £10 million of lifetime gains, worth about $13.4 million. The measure, announced by finance minister John Healey last week, is intended to reward entrepreneurs who take risks and create wealth in Britain, and to let them reinvest the proceeds.
Helen Miller, the IFS director, told parliament’s Treasury Committee on Tuesday that the design of the relief works against its own purpose. Rather than helping young companies grow, she argued, it would mainly benefit people who are already established, with tax office estimates pointing to an average windfall of £500,000.
Worse, she said, the relief creates an incentive to sell early. A founder who has enjoyed a period of strong growth would be encouraged to dispose of the company quickly in order to claim the lower rate, instead of letting the business mature and selling at a later date. “I can’t imagine that anybody in the Treasury could have looked at the evidence around entrepreneurship and thought this was a good policy,” she said.
The criticism rests on a single Reuters report of Miller’s evidence to the committee, and the finance ministry had not commented at the time of that report. That matters because the debate over the relief is, at heart, a dispute about evidence: whether a lower tax bill at the point of sale genuinely keeps companies in Britain, or simply pays founders for decisions they would have made anyway.
Ministers have long worried about Britain’s failure to hold on to its most successful companies. The most frequently cited example is DeepMind, the artificial intelligence firm bought by Google in 2014, which has since become a symbol of British innovation developed elsewhere.
Healey, in his budget speech, framed the relief as a reward for risk-taking and wealth creation. The finance ministry has estimated that it will cost taxpayers £1.3 billion in total between the 2027/28 and 2031/32 financial years, a substantial sum for a policy whose benefits the IFS says are unproven.
If Miller is right, the relief could end up subsidising early exits rather than long-term growth, leaving the Treasury with a large bill and little to show for it in productivity or scale. If ministers are right, it could help persuade the next generation of founders that building a company in Britain pays. Parliament will get its first test of which account holds when the relief comes into force in April.
Sources: Reuters, “UK’s new tax break for entrepreneurs is ‘dreadful’ policy, IFS boss says”, 3 November 2026, https://www.reuters.com/legal/transactional/uks-new-tax-break-entrepreneurs-is-dreadful-policy-ifs-boss-says-2026-11-03/
