If you own a business or part of one, you could be missing out on significant savings when it comes to Inheritance Tax. Business Relief offers the chance to reduce the taxable value of your estate by 50% or even 100% on qualifying business assets. This relief can make a big difference in how much tax your heirs will need to pay after your death.
Understanding how Business Relief works is crucial because the rules have recently changed, including new limits on the relief you can claim. Careful planning is needed to use these exemptions effectively and avoid unexpected tax bills. You might even find that selling your business before death could sometimes be more tax-efficient, depending on your situation.
By knowing what counts as a qualifying business asset and staying up to date with the latest rules, you can make better decisions about your estate. Find out how to protect your business and your family’s future by making full use of the available Business Relief on Inheritance Tax. For more details on these changes, see the latest guidance on business relief for Inheritance Tax.
Business Relief can significantly reduce the amount of Inheritance Tax (IHT) you pay on business assets. It applies to different types of business property and has clear rules on what qualifies. Knowing how the relief works and what assets you can claim it on is important if you own or plan to pass on a business.
Business Relief, often called Business Property Relief (BPR), is an IHT relief that cuts the taxable value of eligible business assets by 50% or 100%. It aims to help business owners pass on enterprises without heavy IHT charges.
You can claim full 100% relief on shares in unlisted companies or businesses you control. Other assets, like business land and buildings, often get 50% relief. This means that when you die, these assets may face reduced or no IHT.
The relief was introduced to prevent forced sales of family businesses on death. It applies only to qualifying business interests, not all types of property.
To claim Business Relief, you must own a relevant business asset for at least two years before death or gifting. The business must be active and trading, not mainly investment property or stocks.
You must be a legitimate business owner or partner. The business should be operating commercially, not just holding passive investments.
Some businesses, like dealing in land or buildings as investments, or providing certain financial services, may not qualify.
If you meet the criteria, you reduce the IHT bill on your business assets by either 50% or 100%, depending on the asset type.
Qualifying assets include:
Non-qualifying assets include:
The type of asset often determines the percentage of relief you get. Knowing exactly what qualifies helps you plan your estate better.
HMRC provides detailed guidance on Business Relief rules, including how to claim and what counts as qualifying property. They clarify complex cases and ongoing updates.
The government periodically reviews these rules to ensure fair treatment of business owners without misuse. Recent technical consultations help improve transparency and administration.
You can find official HMRC manuals and updates online, which offer specific examples and case studies for your situation. Getting professional advice based on HMRC guidance will help you avoid errors and maximise relief.
More detailed information about the scope of Business Relief is available through official GOV.UK guidance.
You can reduce the amount of inheritance tax you pay if your estate includes certain assets. Some reliefs cover full exemption, while others reduce the taxable value by half. Understanding how different types of shares, family businesses, agricultural property, and equipment are treated can make a big difference in your tax bill.
Business Relief offers either 100% or 50% relief depending on the asset type.
100% relief applies to qualifying assets like unquoted shares in private companies, certain types of agricultural property, and some family business interests. This means these assets are completely exempt from inheritance tax.
50% relief applies mostly to other business assets such as some listed shares on the Alternative Investment Market (AIM), land and buildings used in a business, and some machinery. This relief halves the value of these assets for tax purposes.
Knowing which relief applies helps you plan and protect your estate effectively, especially as the rules change in 2026.
Unquoted shares in private companies qualify for 100% relief. This includes shares in family businesses where you control or significantly influence the company.
Shares listed on the Alternative Investment Market (AIM) get 50% relief. AIM shares are less established than those on the main market but still qualify for some relief to encourage investment.
Fully quoted or listed shares on the main stock exchange usually do not qualify for business relief. You will not get relief on these shares unless they fall under specific circumstances.
Understanding the difference in share types is key to knowing what can benefit your estate.
Agricultural Property Relief (APR) offers 100% relief on qualifying farmland and buildings used in farming. This applies not only to farmers but to any owner who rents out land or operates a family business tied to agriculture.
Family businesses often qualify for business relief if they meet the conditions. Typically, the business must be trading and actively managed, not mainly investment holding.
Still, changes in the rules mean there is a combined cap of £1 million for fully exempt relief starting from April 2026, so planning is essential.
Understanding the difference between agricultural and business relief will help you maximise exemptions for your assets.
Machinery and business buildings generally attract 50% business relief. This includes equipment necessary for running your business or farm.
The market value of these assets is used to calculate relief — this means the current price someone would pay, not the original cost or book value.
It’s important to get accurate valuations to claim the correct relief. Over- or under-valuing your assets can cause problems with the tax authorities.
Knowing the rules about machinery, buildings, and how to value them correctly can reduce inheritance tax liability on your business assets. You can find more details on valuation and relief in official HMRC forms such as Schedule IHT413.
Elevate your estate planning with Assured Private Wealth! We offer will writing for high net worth individuals, business lpa, and specialized retirement planning for married couples. Prepare for the future with our trust succession planning and LPA for health. Click to secure your legacy today!
Managing your business assets during your lifetime can help reduce inheritance tax and protect wealth for the future. Making the right decisions about gifts, trusts, and planning can improve tax efficiency and secure your business legacy.
When you make lifetime gifts, some can be classed as potentially exempt transfers (PETs). If you survive for seven years after gifting a business asset, the gift usually becomes exempt from inheritance tax. This gives you a way to reduce your estate’s taxable value.
However, if you pass away within seven years, the gift may be taxed, sometimes at a reduced rate depending on the timing. You should keep detailed records of all lifetime transfers to help with future tax assessments.
Business property relief can further reduce the value of these gifts, often by 50% or 100%, if the assets qualify. Owners must have held the business or assets for at least two years before transferring to benefit from this relief. For more detail, see business property relief rules on abrdn’s guide.
Transferring business assets into trusts can provide control over how assets are managed after your death. However, many transfers to trusts trigger immediate inheritance tax charges unless they qualify for relief.
Interest in possession (IPDI) trusts allow beneficiaries to receive income during their lifetime. Business assets held for at least two years in these trusts often qualify for business relief, reducing IHT to zero within the trust.
Discretionary trusts usually face an immediate 20% charge on transfers over the nil rate band. Still, trusts are useful for planning if you want to protect assets for multiple beneficiaries.
It’s critical to review the type of trust used and how long assets have been held to maximise tax efficiency.
To keep your business within the family, your succession plan needs to be tax smart. Holding assets jointly with a spouse can mean both spouses use their nil rate bands effectively. Transfers between spouses generally do not trigger inheritance tax.
You should aim to meet the two-year ownership requirement before transferring assets. This ensures eligibility for business property relief and maximises tax advantages.
Using lifetime transfers combined with trusts can protect business continuity and create a smooth handover. Regularly review your plan to stay aligned with changing rules or business circumstances.
Executors and trustees play key roles in managing your estate and ensuring tax efficiency. Executors handle your will and submit inheritance tax returns, needing clear instructions and accurate records.
Trustees must understand the complex reliefs and rules to claim business property relief correctly within trusts. Their decisions affect when and how assets are taxed.
Because of the complexity, professional advice is essential. Tax experts and solicitors help you navigate transfers, trusts, and tax laws effectively. They also ensure compliance and keep your estate plan up to date.
Speaking with professionals early can prevent costly mistakes and help you make the most of exemptions and reliefs available. Guidance on planning and tax can be found at HMRC’s Inheritance Tax Manual.
You can reduce your Inheritance Tax (IHT) bill by using available allowances and exemptions carefully. Accurate filing of forms like IHT400 and IHT413 is essential to claim Business Relief. Recent and upcoming changes from the 2024 Autumn Budget could affect your planning.
You can transfer any unused nil rate band allowance to your spouse or civil partner. This means if they did not use their full £325,000 nil rate band before they died, you can add it to your allowance, increasing the amount of your estate exempt from IHT.
The spouse exemption also allows you to pass assets to your partner free of IHT without losing any relief. This helps reduce the estate’s overall tax, especially when combined with Business Relief on qualifying business assets.
Make sure to consider both exemptions when planning your estate. They can work together, reducing IHT payable on business assets like unlisted shares or qualifying AIM-listed shares held within your estate.
To claim Business Relief and other exemptions, you must complete the IHT400 form, which is the main Inheritance Tax account. Schedule IHT413 details business and agricultural assets and supports your claim for relief.
Filing these forms accurately is crucial. They provide HMRC with details about your business assets, such as shares in property development firms or unquoted companies, to confirm eligibility for 50% or 100% Business Relief.
If these forms are missing or incomplete, your estate may face delays and higher tax liabilities. Always provide supporting valuations and keep records of any transfer of value related to gifts or shares to ensure claims are fully accepted.
The 2024 Autumn Budget introduced changes to Business Relief rules effective from 6 April 2026. These include limits on relief and new anti-forestalling measures for lifetime transfers between 30 October 2024 and 5 April 2026.
One key aspect is the introduction of a £1 million cap on the value of business assets that qualify for relief. This change restricts how much value can be exempt from IHT even if you hold large amounts of qualifying business assets.
These rules aim to tighten the definitions of which assets qualify, affecting unquoted and AIM-listed shares, property development businesses, and other trading assets. You should review your estate planning now to adjust for these upcoming limits and avoid unexpected tax liabilities.
Plan for the future with Assured Private Wealth! Our retirement planning advisors specialize in strategies for doctors, ensuring your peace of mind. Benefit from our joint lasting power of attorney services, will writing for teachers and mirror will writing services. Click now to secure your legacy.
Call us for a friendly chat on 02380 661 166 or email: info@apw-ifa.co.uk
