What is Business Relief?

NEWS UPDATE

Business Relief (“BR”) (or Business Property Relief as it is sometimes known) is an exemption from inheritance tax that was first introduced for transfers of wealth after 1976. The relief was introduced to help family-owned businesses be passed down the generations by avoiding those businesses having to sell off assets or be broken up to pay the inheritance tax bill imposed on the death of the owner.

The relief operates by exempting either 100% or 50% of the value of property qualifying for Business Relief from the value of the estate chargeable to inheritance tax. Thus, Business Relief can enhance the value of an estate, net of inheritance tax, that is available to beneficiaries.

A 100% rate of BR was introduced for transfers of value consisting of minority holdings of certain unquoted shares occurring after 6 April 1996. For transfers of value after 5 April 2026 the 100% rate of relief for combined BR and Agricultural Property Relief claims is expected to be capped for an individual at £2.5m. Further detail on the operation of the cap is provided below.

The relief was introduced to help family-owned businesses be passed down the generations by avoiding those businesses having to sell off assets or be broken up to pay the inheritance tax bill imposed on the death of the owner.

Broadly, the conditions for an asset to qualify for BR are:

The assets include a business (carried on by a sole trader or interest in a partnership), shares in an unquoted company or assets held personally used in a qualifying business.
Ownership throughout the two-year period leading up to the transfer.
The business must be carried on with the intention of making a profit.
There is not a binding contract for sale of the asset.
Companies must not be in liquidation or winding up.
The business must not consist “wholly or mainly” of dealing in shares, land or buildings or making or holding of investments.

Therefore, shares in unlisted companies that do not deal in investments, securities, stocks or shares, or land or buildings should qualify for BR as will shares in a company which is wholly or mainly the holding company of one or more companies which do not deal in investments, securities, stocks or shares, or land or buildings.

An investment in unquoted shares into a company qualifying for BR will be eligible for BR once the investment has been held for 2 years, or immediately if the investment was made using the proceeds of a previously BR qualifying asset within three years of the sale, or the investment was inherited from a spouse on their death and the combined ownership period meets the 2 year holding requirement.

Significant changes to BR and Agricultural Property Relief (“APR”) were introduced in the Budgets of 2024 and 2025, effective for transfers of value after 6 April 2026 and anti-forestalling provisions applying to lifetime transfers between 30 October 2024 and 5 April 2026. Post 6 April 2026 the qualifying conditions have not changed but the amount of relief will be capped. The first £2.5m of qualifying assets will be exempt from inheritance tax and the excess will attract 50% relief (in effect producing a 20% tax rate).

The £2.5m cap will be shared across assets qualifying for BR and APR on pro-rata basis. In addition, listed shares treated as unquoted shares, e.g. AIM listed, will only qualify for 50% rather than 100% IHT relief from 6 April 2026.

Post 6 April 2026 the qualifying conditions have not changed but the amount of relief will be capped. The first £2.5m of qualifying assets will be exempt from inheritance tax and the excess will attract 50% relief (in effect producing a 20% tax rate).

TECHNICAL TEAM

Simon Palmer

Group Technical Director

Simon Palmer

Group Technical Director

Simon.palmer@theingeniousgroup.co.uk

Simon has overall responsibility for the tax affairs of Ingenious’ managed investment funds and services and of Ingenious’ group companies. Simon previously spent 21 years with Ernst & Young, including 8 as a partner, and 5 years providing tax consultancy services. Simon started his career as a tax inspector with the Inland Revenue (now HMRC) and was a member of the Chartered Institute of Taxation.

Sebastien Couplez

Technical Director

Sebastien Couplez

Technical Director

Sebastien.Couplez@theingeniousgroup.co.uk

Sebastien has extensive experience in tax transactional advisory and compliance across Ingenious’ managed funds and services, including Estate Planning, EIS, VCT, and film partnerships. Prior to joining Ingenious, Sebastien worked as an Advisor at Ernst & Young. Sebastien holds a Chartered Accountant designation from the Institute of Chartered Accountants of Scotland and a BCom (Honours) in Finance from the University of the Witwatersrand in Johannesburg, South Africa.

Jack Ingilby

Technical Manager

Jack Ingilby

Technical Manager

jack.ingilby@theingeniousgroup.co.uk

Jack provides tax support across Ingenious’ managed funds and services, including Estate Planning, EIS, VCT, and film partnership, and is responsible for client tax reporting. Prior to joining Ingenious, Jack was at Deloitte. Jack is a member of the Chartered Institute of Taxation.

Ingenious Insights Case Studies

BR Planning After April 2026: Fix the AIM Gap

Manage Pension-related Inheritance Tax (IHT) Risks Using IEP Apex

Business Relief & Post-Business Self Planning

Business Relief & Power of Attorney

Ingenious Insights FAQs

What is Inheritance Tax and who pays it?

What is Business Relief?

What benefit does an investment within the Ingenious Estate Planning service provide?

How does an investment in a Business Relief solution compare to other estate planning solutions?

Business Relief and Trusts

My client already holds a Business Relief qualifying asset. Can they redeem the asset and invest in an Ingenious Estate Planning solution and immediately benefit from Business Relief?

Can my client borrow funds to make a Business Relief qualifying investment?

Once an investment is made, can my client easily access their investment at a later date and what might be the associated tax implications?

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