Business Property Inheritance Tax Relief

 

  A person's estate may incur Inheritance Tax charges if it is valued at over £325,000. The person's estate may include a business. Business Relief (formerly known as Business Property Relief) is a relief against Inheritance Tax of up to 100% on qualifying business assets. It may be available in relation to lifetime gifts of business assets and to transfers arising on death.

  A business must meet certain conditions to qualify for Business Relief. This is a complex area. The information that follows is an overview only. It is recommended to seek professional advice in relation to the specific case. If the business does qualify for Business Relief, we can provide guidance so that the business can be run by the owner in a way that will allow the business to continue to qualify under the current rules.

  A business will have relief from Inheritance Tax where certain conditions are met:

     the business is a qualifying business;

     the asset itself is relevant business property and has been owned for at least the relevant minimum period;

     the business is not subject to a binding contract of sale.
 

  To be a qualifying business, the business must be carried on with the intention of making a profit (i.e. it is trading). If a company engages in both trading activities and investment activities, in order to qualify for Business Relief, it must be mainly engaged in the trading activities.
 

  Assets must be relevant business assets to qualify. Some assets will receive relief at 100%, whilst others will only receive 50% relief.
 

   100% Business Relief applies to:

      an interest in an unincorporated business;

      unquoted shares in a company; However, from 6 April 2026 AIM shares will  qualify for only 50% relief 

     unquoted securities in a company which gave the transferor control of the company immediately before the transfer.

   50% relief applies to, for example, quoted shares or securities in a company that gave the transferor control of that company.

   The business must have been owned for at least two years to qualify for BPR. The legislation contains certain exceptions to this rule.

   With effect from 6th April 2025, 100% Business Relief is limited to the first £1 million of qualifying business and agricultural property. For the value above £1 million, the rate of relief is 50%.