A Quick Guide to: Business Relief
Business Relief (“BR”) was first brought into Inheritance Tax legislation in 1976. At that time, its primary objective was to ensure that family-owned businesses could continue operating as viable trading entities after the owner/s had passed away, without the need for them to be sold, broken up or refinanced in order to satisfy an inheritance tax obligation. Over time, successive UK governments have grown to value the importance of encouraging people to invest in such trading companies, whether or not they are running the company themselves.
BR has become an established tax relief for more than 40 years. The 2024 Autumn Budget introduced changes to IHT relief regarding BR-qualifying assets, including shares held in BR-qualifying companies, that came into effect from 6 April 2026. Under the new rules the first £2.5 million of BR-qualifying assets per individual, that are held for at least two years (and at the point of death), continue to attract full IHT relief. Any excess over £2.5 million attracts a reduced rate of relief of 50% (i.e. an effective IHT rate of 20%).
BR-qualifying shares in companies that are quoted on AIM that are held for at least two years (and at the point of death) benefit from a reduced rate of relief of 50% of the IHT 40% rate (i.e. an effective IHT rate of 20%).
Investors should be mindful that investments in trading companies can go down as well as up and investors may not get their initial investment back. It’s worth noting that the availability and/or advantages of Business Relief may vary over time as it is subject to review and amendment by the UK Government. As such, it’s important to regularly review the current rules and regulations surrounding Business Relief to ensure that it remains a viable option for reducing a potential IHT liability as the value of tax relief depends on your individual circumstances.