The Team Around the Founder — what the IHT reform does to co-founders, early employees, and vested equity holders

Public coverage of the April 2026 reform has focused on the lead founder. A growing technology company is not one founder. The reform sits across a team — co-founders with material stakes, early employees whose vested options compounded across rounds, senior operators with later-stage grants. This piece walks the population the existing pieces have not directly addressed, evaluates the planning levers as they actually apply to that population, and frames the recruiting and retention question this creates for UK technology companies.

The team around the founder

The April 2026 reform changes what happens at death to qualifying business assets above £2.5 million per person. Public coverage has focused on the lead founder. But a growing technology company is not one founder; it is a team in which several people, often more than the visible cap-table headlines suggest, hold equity that the reform now sits across. This piece is about the team population — the co-founders, the early employees with vested options, the senior hires whose grants compounded across two or three up-rounds — and what the reform does to them, to their families, and to the companies that hold them.

The thing that should land first

The lead founder is a visible cohort. They have advisers. They have a planning conversation in their forties or fifties because their stake is unmistakably above the threshold and they know it. The cohort of people around them — the co-founders with smaller but material stakes, the CTO who took 4 per cent at incorporation and never sold, the head of product whose options vested through the last up-round into a paper holding worth several million, the early engineer who joined for the mission and accepted equity in lieu of market salary — is not visible in the same way. Most of them are not in tax-planning conversations. Most of them have not modelled what the reform now means for their estate. Many of them, if asked, would not be able to say within a factor of three what their position is.

One defensible reading is that this is the largest underexamined consequence of the reform inside the UK tech ecosystem. Another defensible reading is that it is small relative to the lead-founder population and will be solved by the same planning levers, working downward. The publication takes the first reading more seriously than the second, for reasons set out at the end. Readers should weigh both.

Who is in the team population

Three sub-populations matter, with different shapes of exposure.

Co-founders with material stakes. A typical UK venture-backed company has between two and four founders. After dilution through Seed, Series A, and Series B, the lead founder might hold 15-25 per cent of the company; co-founders hold 5-15 per cent each. At a Series B post-money of £100 million, a 10 per cent co-founder stake is worth £10 million on paper. SAV adjustments will bring that to perhaps £5-7 million for IHT purposes. The first £2.5 million is sheltered (or £5 million using a spousal allowance); the rest sits above the threshold. This co-founder is in the same structural position as the lead founder — meaningfully exposed, illiquid, in a company that does not pay dividends — without necessarily having the adviser apparatus the lead founder has assembled.

Early employees with vested EMI options or exercised scheme shares. The first ten to twenty hires of a successful UK tech company will typically hold between 0.1 per cent and 2 per cent of the company through EMI or unapproved scheme grants. At the Series B valuation above, a 1 per cent vested holding is worth £1 million on paper, perhaps £500-700k after SAV adjustments — below the threshold and unaffected by the reform. At the Series C or D valuation, the same employee holding can be worth £3-8 million on paper. After SAV adjustment, this puts a non-trivial number of early employees above the £2.5 million threshold for the first time without their having registered the change. The reform reaches this population through compounding across rounds, not through any single planning decision they made.

Senior operators with later-stage grants. The CFO hired at Series B, the VP Engineering hired at Series C, the executives whose grants were sized to the later-round valuations, are a smaller population by headcount but more frequently above the threshold. Their grants were structured by company counsel; the IHT consequence was not typically modelled at the time of grant.

Two practical points before the analysis.

The team population is not visible from the outside in the way the lead founder is. Cap tables are private. The press writes about the lead founder. The reform's exposure across the team is not aggregated anywhere — not in HMRC's published estimates (which are estate-level, not company-level), not in trade-body submissions, not in the academic literature on the reform. The publication believes the team population is materially larger than the lead-founder population, but the precise multiple is unknown.

The team population's planning options are different from the lead founder's options. Most of what is written about the reform assumes the affected person has access to the planning levers a lead founder has — meaningful insurance capacity, the ability to set up family trust structures with adviser support, the option to take a residence-based decision, the time and money to negotiate SAV agressively. For the team population, several of these levers are weaker or unavailable.

The planning levers, applied to the team population

The five levers that get discussed in lead-founder planning, evaluated against the team population's actual situation. Each lever has a strength and a structural limit.

Life insurance written into trust. For a lead founder in their forties, term insurance covering an estimated £3-19 million liability is expensive but available. For a co-founder or senior operator in the same age bracket, the equivalent is achievable with planning. For early employees in their thirties with families and mortgages, the practical barrier is different: not affordability but visibility — most of this cohort does not realise their estate is above the threshold and so does not consider insurance until a triggering event makes the exposure visible. The lever works mechanically; access to the lever depends on the person knowing they need it.

Potentially exempt transfers (PETs). Lifetime gifts of equity drop out of the estate after seven years. For a lead founder considering a generational transfer, this is a usable tool. For a co-founder or senior employee, the lever is constrained by how much equity they actually want to give away during a period when it is still illiquid and may be needed for a future life decision. Gifts of unvested or partially-vested options are also subject to scheme-specific rules that the lever does not always interact with cleanly.

Discretionary trusts and Family Investment Companies. These structures move value out of the estate at the cost of an immediate IHT charge above the £2.5 million trust allowance and decennial periodic charges. They have meaningful set-up cost, ongoing compliance cost, and complexity that scales with the size of the structure. For lead founders with adviser teams, the cost is proportional to the benefit. For team-population members with stakes between £2.5 million and £10 million, the structure cost is a larger fraction of the benefit and the planning conversation often does not happen.

Residence-based planning. Falling outside the UK long-term-resident framework requires accumulating non-UK-resident years to escape the 10-of-20 tax-year test introduced in April 2025. For a lead founder making a deliberate life decision — family, tax, lifestyle — this is a real option, with real costs. For a co-founder operationally embedded in a UK-headquartered company, or an early employee with a working spouse and school-age children, the lever is theoretical rather than usable. The lever exists; the population is not the same.

Section 1033 company buy-back. If the company has distributable reserves, the personal representatives can sell the deceased's shares back to the company to fund the IHT bill. For a profitable mid-market business, this is a clean route. For a venture-backed pre-profit growth company, the reserves do not exist and the lever does not function. The team population in such companies is in the same structural position as the lead founder on this point: the cash to pay the tax is not in the company.

The composite picture: the lead founder has access to the full lever-set, with cost proportional to benefit and the adviser apparatus to use them. The team population has access to the same levers in principle, with the cost proportional to a smaller benefit, the visibility-of-need barrier in practice, and one of the levers (residence) often unavailable on operational rather than financial grounds.

What this means for companies, not just individuals

One angle the existing IHT debate has not engaged: the team-population effect of the reform is also a recruiting and retention question for UK technology companies, not only a personal-tax question for the team members.

Three observations follow.

Equity offers as compensation now carry an unstated tail liability. When a UK tech company offers a candidate a 0.5 per cent EMI grant at Series B, the candidate compares the headline paper value of that grant to a higher salary at a more established competitor or a US-headquartered company. The comparison historically did not include an estimated future IHT exposure, because qualifying business assets passed outside the IHT base. From April 2026, the comparison includes a non-zero tail risk that the candidate's family will inherit a tax liability they cannot fund without selling the shares back to a company that may not have the cash to buy them. The reform changes the implicit value of the equity grant for the recipient. Whether candidates will price this change accurately is an empirical question; the publication's expectation is that some will, most will not initially, and the most-informed candidates will price it the most accurately.

Companies face a question they have not previously had to answer. Should the company itself help its team members plan for the new exposure — by funding pooled adviser access, by contributing to insurance arrangements, by offering structured liquidity windows that allow vested-equity holders to convert paper holdings into liquid assets at planned intervals? Each of these has cost. None has been a standard component of UK tech company comp packages. Some US companies have analogous structures (the secondary tender for vested options, for example, is more common at scale-up US tech companies than at UK equivalents). The reform creates pressure for UK companies to either add these arrangements or accept that their equity grants are now relatively less attractive to a sophisticated candidate.

Cross-border comparisons sharpen. A US-headquartered company hiring into the UK can offer the same nominal equity grant without the same tail-IHT risk — not because the US tax system is gentler (it is not, on capital gains), but because the structural treatment of inherited equity is different. The reform widens the pre-existing gap between UK and US equity compensation as experienced by the recipient, particularly for senior hires whose grants are sized to put them above the £2.5 million threshold. The widening is not large; it is real.

How the four policy positions look from this seat

The publication's long article sets out four design positions on the reform, presented at equal length, in the voice of each position's strongest defender, without authorial verdict. The team-population angle does not change the overall posture — all four remain defensible — but each looks slightly different from this seat than from the lead-founder seat.

Position A — hold the existing mechanism with practical fixes. From the team-population seat, this position depends heavily on which practical fixes. The Lords Sub-Committee's January 2026 recommendation for a 12-month payment deadline and personal-representatives safe-harbour, if adopted, is more useful for the team population than for the lead founder, because the team population is more often without the adviser apparatus needed to negotiate aggressively under tighter timelines. A reader weighing position A on the team-population evidence should weigh adoption of these fixes specifically.

Position B — switch to CGT-on-realisation with separate threshold treatment. From the team-population seat, this position is materially more attractive than from the lead-founder seat. The valuation problem — SAV negotiation, illiquid paper values at death, forced-sale dynamics if instalments cannot be funded — falls hardest on the team population precisely because they have the weakest tools to handle it. Tax at realisation aligns the tax event with the cash event, removing the team-population's largest structural problem. A reader who weights team-population evidence will find the case for position B stronger than a reader who weights only lead-founder evidence. This is part of why the publication is naming the residual lean explicitly at the end of the piece.

Position C — adopt practical fixes and defer the structural question. From the team-population seat, this position is reasonable as a near-term measure and inadequate as a long-term answer. The practical fixes help; the structural valuation-and-liquidity problem remains. A reader weighing position C should weigh how long the deferral is intended to be.

Position D — raise the £2.5 million threshold materially for qualifying unlisted trading-company shares. From the team-population seat, this position addresses the early-employee sub-population (most of whom would fall back below a higher threshold) more effectively than positions A or C, but addresses the co-founder and senior-operator sub-populations less completely. A reader weighing position D should weigh which sub-population they are most concerned about.

Operational notes for company leaders reading this

This section is closer to operational guidance than the publication usually goes. It is included because several readers of the founder piece have asked the publication directly for the team-equivalent. Three notes.

Map your team's exposure once. A one-time exercise, with a tax specialist who understands EMI scheme treatment, to identify which of your current team members are above the £2.5 million threshold on a SAV-adjusted basis at the company's most recent priced round. The exercise is not expensive and the output is small — typically a list of names. Without the list, the team-population conversation is hypothetical.

Decide what, if anything, the company will do. Options range from "nothing, this is a personal tax question for each individual" through "the company offers access to a panel of advisers at preferred rates" to "the company runs structured liquidity windows for vested-equity holders to convert paper into liquid assets at planned intervals." Each option has a cost and a signal. The company should choose deliberately rather than by default.

Update the equity-grant conversation at hire. If the company is offering meaningful equity to senior candidates, the conversation should include — in plain language, with disclaimers — the fact that the reform creates a tail-IHT exposure on vested equity above the threshold, and the fact that the company has (or has not) put in place structures to help with this. Failing to mention it leaves a candidate to discover the tail in a worse way later. Mentioning it is honest and creates a small competitive cost; the publication's view is that honesty is the right side of that trade-off.

The publication's residual lean, named

This piece has been written in the publication's existing register: present the population, present the mechanism, present the planning levers and where each one breaks for this cohort, present the four policy positions without choosing among them, leave the reader to weigh.

The piece does not, however, leave the four positions exactly as it found them. Naming the team population as a meaningfully larger and less-protected cohort than the public debate has so far engaged surfaces evidence that gives positions B (switch to realisation-based taxation) and D (raise the threshold) more weight than positions A (hold-with-fixes) or C (defer). The publication has not chosen among A, B, C, and D, and does not do so here. But a careful reader will see that the team-population angle is not equally helpful to all four, and the publication owes the reader a direct accounting of why.

The lean exists because the piece weights two things heavily.

The piece weights team-population evidence as roughly comparable in importance to lead-founder evidence. The publication is choosing to treat the team population as a first-class cohort in evaluating the reform, rather than as a downstream consequence of decisions made about the lead founder. This is a defensible weighting; it is not the only defensible weighting. A reader who weights the team population less heavily — on the view that the lead founder's decisions and planning options will, in practice, propagate downward through company-level structures — will reach a different conclusion. That alternative weighting is reasonable and the publication does not call it wrong. The publication's weighting reflects the author's judgment that the team population is large in absolute terms, structurally less able to use the existing planning levers, and less visible in the current public debate. A reader can disagree with each of those three judgments separately or in combination.

The piece weights the structural valuation-and-liquidity problem as decisive for the team population in a way it is not for the lead founder. Positions B and D address that structural problem more cleanly than positions A and C. A reader who thinks practical fixes within the existing mechanism (the Lords Sub-Committee proposals, expanded s.227 instalment terms, more flexible SAV negotiation timelines, expanded life-insurance trust treatment) can resolve enough of the problem to make positions A or C workable will reach a different conclusion. That reader is not wrong on the evidence; they are weighting the practical fixes more heavily than the publication does in this piece. The publication's weighting reflects the author's judgment that the structural problem is large enough that practical fixes are necessary but not sufficient. A reader can take the contrary view in good faith.

So the lean is real. It is in the publication's choice of which evidence to weight and how heavily, not only in the evidence itself. The publication owns that choice rather than presenting it as evidence-driven and inevitable. Two readers who weight the same facts differently can both reach defensible conclusions; the publication has presented its weighting and named what it would take to reach a different one.

One further honest note: the author is a UK tech founder who has co-founded businesses and held the equity-grant conversations described in this piece on the company-leader side. The author's standing on this question is real and is part of why the team-population angle landed for him as worth a separate piece. The standing also creates a pull toward weighting the team-population evidence more heavily than a reader without that standing might; the publication has tried to compensate for this pull by naming it explicitly here and by writing the case for the alternative weighting in the same paragraph as the case for its own.

The publication's view, named: the team-population angle is real, has not been engaged elsewhere, and changes the policy conversation modestly — not decisively. Readers will reach their own view. The four positions remain defensible, with B and D somewhat more weighted by this piece than A or C, for the reasons above.