Business Relief: What’s Changing and What You Need to Know
Welcome to the final topic we’re going to cover in this, our, Pre-Budget series.
Below, we’re looking at Business Relief, a long-standing inheritance tax break that has benefited business owners and, increasingly, investors using Business Relief-qualifying portfolios and inheritance tax services.
HOW BUSINESS RELIEF WORKS (AND WHO BENEFITS)
Business Relief (formerly known as Business Property Relief) is a valuable inheritance tax benefit that allows certain business assets to be passed on to beneficiaries with little or no inheritance tax to pay.
While originally designed for business owners, Business Relief has also become an important planning tool for investors. Some inheritance tax services and AIM portfolios invest specifically in companies that qualify for this relief. Once held for two years, these investments can be passed to your beneficiaries free from inheritance tax.
In short, if you’ve held qualifying business assets, such as an interest in a trading business or shares in an unquoted company, for at least two years, their value may currently qualify for 100% relief from inheritance tax.
This relief has been crucial for investors, entrepreneurs and family business owners – ensuring an investment or family business doesn’t have to be sold to cover a 40% tax bill on death.
WHAT’S CHANGING FROM 2026?
The rules for Business Relief are set to tighten.
From 6 April 2026, there will be a £1 million cap on the value of assets that can qualify for 100% relief.
Any qualifying business assets above that £1 million allowance will only get 50% relief, effectively leaving a 20% inheritance tax charge on that portion. In practical terms, leaving a qualifying asset worth more than £1 million to your heirs could incur tax on the amount above that threshold.
AIM holdings will no longer benefit from 100% Business Relief. Instead, AIM portfolios will receive only 50% relief, regardless of portfolio size.
Below is an example of the tax due, pre- and post 6 April 2026, on a £5 million business on death.
Under the current rules, the full £5 million business value would be completely exempt from inheritance tax. From 6 April 2026, however, only £1 million will qualify for full relief, and the remaining £4 million will attract a partial exemption — creating an £800,000 tax bill for the estate.
For many families, this change could seriously impact business continuity and succession, as funds may not be available to settle the tax bill. Without early planning, this could mean selling part of the business or other assets at an inopportune time.
Unlike some other allowances, the £1 million Business Relief limit can’t be shared between spouses. If one partner doesn’t use their full allowance, it’s lost.
These changes mean that clients with business assets exceeding £1 million may need to revisit their estate plans. In particular, it may be worth considering the transfer or gifting of business assets during their lifetime to make full use of the available allowances.
HOW WE CAN HELP
If you might be affected, we’ll review your estate and succession plans, particularly where a business is involved.
Whether you hold shares in a family business or you’ve invested through an inheritance tax service, we can help you review how these changes might affect you. We’ll assess whether Business Relief investments remain suitable as part of your overall estate plan, and explore other options that could complement or replace this approach.
By acting early, you can stay confident that your plans remain robust and ready for the changes ahead.
If you’d like to understand how the new Business Relief limits could affect you, please speak to us to see how the new rules could apply in your circumstances.
In the meantime, rest assured we’ll be tuning in on 26 November for the Budget and will share our thoughts afterwards on what the changes could mean for you.
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