Replacing Lost Business Relief: Why Timing Can Save Families Millions

Business Relief (BR) reduces Inheritance Tax (IHT) on business assets, while Business Asset Rollover Relief (used to be called Business Reinvestment Relief) defers Capital Gains Tax (CGT)

Business Relief: What Qualifies and How it Works

Business Relief (BR) reduces the value of certain business assets when calculating Inheritance Tax (IHT).  It can apply on death or on certain lifetime transfers.

Assets Qualifying for 100% Business Relief

You can get 100% BR on:

1. A business or an interest in a business

• This includes sole traders and partnership interests.
• The business must be a trading business, not mainly investment‑based.

2. Shares in an unlisted company

• Includes shares on the Alternative Investment Market (AIM).
• Applies whether the deceased held a minority or majority stake.

Assets Qualifying for 50% Business Relief

You can get 50% BR on:

1. Shares controlling more than 50% of the voting rights in a listed company

• Must be a controlling holding.
• Applies only to companies listed on a recognised stock exchange.

2. Land, buildings or machinery owned personally by the deceased but used in a business

• The business must be:
• One they controlled, or
• A partnership in which they were a partner.
• Common example: a director‑shareholder owning a building personally and leasing it to their trading company.

3. Land, buildings or machinery held in trust and used by a qualifying business

• The trust must have the right to benefit from the business using the asset.

Minimum Ownership Period

To qualify for Business Relief, the deceased must have owned the business or asset for at least 2 years before death.

This applies across all categories of BR.

When Business Relief Does Not Apply

BR is denied if the business is:

• Mainly investment‑based (e.g., property letting, securities, land dealing)
• Not carried on for gain
• Subject to a binding contract for sale at the time of death
• A non‑trading holding company with no qualifying subsidiaries

Business & Agricultural Relief: Key Changes from 6 April 2026

Major reforms are being introduced to APR and BPR from 6 April 2026, including new allowances, reduced relief levels, and changes to how trusts are treated.  Below is a concise breakdown of the new rules.

See: £2.5m Nil Rate Band

1.  Introduction of a £2.5 million 100% IHT Relief Allowance (Individuals)

Individuals will have a £2.5 million allowance covering assets that currently qualify for 100% APR and/or 100% BPR.

• Applies to the combined value of qualifying agricultural and business assets.
• Once the allowance is used, only 50% relief will apply to further qualifying assets.

2.  Allowance applies to lifetime gifts and on death

The £2.5m allowance:

• Applies to lifetime transfers and death estates.
• Lifetime gifts made on or after 30 October 2024 will reduce the allowance available on death if the donor dies on or after 6 April 2026.

This effectively creates a “look‑back” period for gifts made from late 2024 onwards.

3.  Lifetime allowance refreshes every 7 years

For individuals:

• The £2.5m allowance refreshes every 7 years, mirroring the PET/CLT cycle.
• From April 2031, the allowance will be indexed to CPI, but this requires a future government to pass a statutory instrument—so it is not automatic.

4.  Trusts get their own £2.5 million 100% Trust Relief Allowance

Relevant property trusts will also have a £2.5m allowance.

• This allowance refreshes every 10 years (aligned with the trust’s 10‑year charge cycle).
• Once exceeded, qualifying assets receive 50% relief, giving an effective 20% IHT charge.

5.  50% relief becomes the default above the allowance

After the £2.5m allowance is used:

• Only 50% relief applies to further qualifying assets.
• This applies to both individuals and trusts.
• The effective IHT rate becomes 20% on the value of qualifying assets above the allowance.

6.  AIM and EIS shares lose 100% relief

Shares in companies designated as “not listed” on recognised stock exchanges—including:

• AIM shares
• EIS shares quoted on AIM

—will only qualify for 50% relief from 6 April 2026.

This is a significant shift for investors who currently rely on 100% BPR.

7.  Trust exit charges standardised

All relevant property trust exit charges will be calculated on unrelieved values, meaning:

• APR/BPR is ignored when calculating exit charges.
• This applies regardless of whether the exit occurs before or after the first 10‑year anniversary.

This removes the previous distinction between pre‑ and post‑anniversary exits.

8.  Transferable unused allowance on death

Any unused portion of an individual’s £2.5m allowance can be transferred to a surviving spouse or civil partner.

• Applies even if the first death occurred before 6 April 2026.

This mirrors the transferable nil‑rate band concept.

9.  Instalment option extended

The option to pay IHT in up to 10 equal annual instalments, interest‑free, will be extended to all property eligible for APR/BPR.

This improves liquidity planning for estates with illiquid business or agricultural assets.

Replacing Lost Business Relief:  Why Timing Can Save Families Millions

Business Relief (BR) is one of the most valuable — yet often misunderstood — tools in inheritance tax planning.  To qualify, shares must generally be held for two out of the last five years and still be held at death.

What many clients don’t realise is that you can preserve an existing BR clock even if you sell a qualifying business, provided the proceeds are reinvested into another BR‑qualifying asset.  When the original business had already been held for more than two years, the reinvestment does not restart the clock.

The reinvestment time limits are set out in s152 (3) of the Taxation of Chargeable Gains Act 1992, which requires the new asset to be acquired in the period beginning 12 months before and ending 3 years after the disposal of the old assets.

A Real Example: Preserving a Lifetime of Work

A client couple of ours sold their long‑held family business and reinvested the £1.5 million proceeds into a specialist investment service targeting unquoted companies expected to qualify for BR.  Because they had owned their original BR‑qualifying shares for 30 years, the reinvested funds immediately regained BR status.

3 months later one of these clients passed away and then just a year later, sadly, the suviving partner also died.
Without the reinvestment, the estate would have faced a £600,000 inheritance tax bill on the business sale proceeds.  Instead, the value remained fully outside the taxable estate.

This wasn’t luck — it was the result of timely, proactive advice and it meant the value of a business they had spent their lives building passed intact to their family.

The Lesson: In Estate Planning, Time Is a Critical Factor

This case highlights a simple truth:
When it comes to IHT planning, delay can be extremely expensive.

People often assume they have time.  But life events don’t wait for paperwork, meetings, or “when things calm down.”  Acting decisively — especially after major liquidity events like a business sale — can make the difference between preserving a legacy and losing a significant portion of it to tax.

Actng early isn’t a ‘knee jerk’ reaction; it’s proactively protecting your hard earned wealth from inheritance tax.

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