Business Property Relief, now referred to by HMRC as Business Relief, is a UK inheritance tax relief that supports the transfer of qualifying business assets between generations. It can reduce the value of a qualifying business, or its qualifying assets, by either 100% or 50% when working out the inheritance tax (IHT) due on an estate.
This guide explains how Business Relief works, which assets qualify, and how the rules are changing for deaths on or after 6 April 2026 following the reforms confirmed by HMRC.
Key Takeaways
- Business Relief reduces the value of qualifying business assets when calculating inheritance tax. Relief is given at either 100% or 50%.
- The deceased or donor must usually have owned the business or asset for at least two years before death or before making the gift.
- For deaths on or after 6 April 2026, 100% relief is capped at a combined £2.5 million allowance covering both Business Relief and Agricultural Relief. Qualifying assets above the allowance receive 50% relief.
- Any unused part of the £2.5 million allowance can be transferred to a surviving spouse or civil partner, potentially giving couples up to £5 million of combined 100% relief on top of standard IHT allowances.
- Shares on stock markets that HMRC treats as “not listed”, such as the Alternative Investment Market (AIM), will receive 50% relief in all cases from 6 April 2026.
What Is Business Property Relief?
Business Property Relief is a statutory inheritance tax relief introduced under the Inheritance Tax Act 1984. Its purpose is to allow qualifying businesses and business assets to pass to the next generation, or into a trust, without forcing the sale of the business to meet an IHT bill.
When the relief applies, the value of the qualifying property is reduced for inheritance tax purposes before the standard 40% rate is applied to any taxable value of the estate above the available nil-rate bands.
You can find HMRC’s overview of the relief on the Business Relief for Inheritance Tax page on GOV.UK.
How Much Relief Is Available?
There are two rates of Business Relief:
100% relief can apply to:
- a business or an interest in a business (for example, a sole trader business or a partnership share)
- shares in an unlisted company, where the company is mainly trading rather than holding investments
50% relief can apply to:
- shares controlling more than 50% of the voting rights in a listed company
- land, buildings or machinery owned personally and used in a business that the deceased was a partner in or controlled
- land, buildings or machinery used in a business and held in a trust, where the business has the right to benefit from those assets
For deaths on or after 6 April 2026, qualifying property that would otherwise receive 100% relief is also subject to the new £2.5 million allowance covered below.
Qualifying Business Assets
To qualify for Business Relief, the asset must be “relevant business property” as defined in the legislation, and the underlying business must be carrying on a trade rather than holding investments.
Typical qualifying assets include:
- a sole trader business
- an interest in a trading partnership
- shares in an unlisted trading company
- land, buildings and machinery used in a qualifying trading business
What Does Not Qualify
According to HMRC guidance, you cannot claim Business Relief if the business is one that mainly deals with:
- securities, stocks or shares
- land or buildings
- making or holding investments
You also cannot claim Business Relief where the business:
- is a not-for-profit organisation
- is being sold (unless the sale is to a company that will continue the business and the estate is paid mainly in shares of that company)
- is being wound up (unless this is part of a process that allows the business to continue)
Individual assets are excluded if they were not used mainly for the business in the two years before transfer, or if they are not needed for future use in the business. Cash or other assets held beyond the reasonable needs of the business may be treated as excepted assets and excluded from the relief, depending on the facts.
The Two-Year Ownership Rule
To qualify for Business Relief, the deceased or donor must usually have owned the business or asset for at least two years before death or before making the gift.
There are limited exceptions. For example, where an asset is inherited from a spouse or civil partner who owned it for less than two years, the periods of ownership can usually be added together to meet the two-year test.
Changes to Business Relief from 6 April 2026
Following the Autumn Budget 2024 and subsequent updates in 2025, HMRC has confirmed significant reforms to Business Relief and Agricultural Relief that take effect from 6 April 2026. The detail is set out in the policy paper Agricultural property relief and business property relief changes on GOV.UK, last updated by HMRC on 3 March 2026.
The main changes are summarised below.
A New £2.5 Million Allowance for 100% Relief
For deaths on or after 6 April 2026, a new £2.5 million allowance applies to the combined value of property in an estate qualifying for 100% Business Relief or 100% Agricultural Relief.
- Qualifying property up to the £2.5 million threshold continues to receive 100% relief.
- Qualifying property above the threshold receives 50% relief.
The allowance also applies to qualifying property held in trust.
Transfer Between Spouses and Civil Partners
Any unused part of the £2.5 million allowance can be transferred to a surviving spouse or civil partner.
If the first spouse or civil partner died before 6 April 2026, the surviving partner is treated as having a full £2.5 million allowance available to transfer, on top of their own. In practice, where both allowances are used on second death, this can allow up to £5 million of qualifying business or agricultural property to receive 100% relief.
According to HMRC, when this £5 million is combined with the standard £325,000 nil-rate band of each spouse or civil partner, two individuals could pass on up to £5.65 million tax-free between them. The residence nil-rate band may add further relief on top, where its conditions are met.
A claim to transfer the unused allowance must be made by the later of:
- four years after the death of the person whose estate is being administered, or
- six months after the executor or administrator started in the role.
AIM Shares and Other “Not Listed” Shares
From 6 April 2026, the rate of Business Relief for shares admitted to trading on a recognised stock exchange but designated by HMRC as “not listed”, such as those traded on the Alternative Investment Market (AIM), is reduced from 100% to 50% in all cases. The same 50% rate also applies to qualifying shares listed on foreign exchanges that are not on HMRC’s list of recognised stock exchanges.
These shares do not benefit from the new £2.5 million 100% allowance. They are relieved at 50% from the first £1 of value upwards.
Lifetime Gifts and the Seven-Year Rule
The reforms also affect lifetime gifts of business property. Where a lifetime gift was made on or after 30 October 2024 and the donor dies on or after 6 April 2026 within seven years of making the gift, the new rules, including the £2.5 million allowance, apply when calculating the inheritance tax position on death.
This makes early planning, and clear records of when gifts were made, more important than before.
Trusts
A separate £2.5 million trust allowance applies to relievable agricultural and business property in trusts. The way relief interacts with the ten-year anniversary charge and exit charges is also being reformed, with HMRC standardising how exit charge rates are calculated. Trustees holding qualifying business assets should review their position before the next ten-year charge.
Inheritance Tax by Instalments
The option to pay inheritance tax in ten equal annual instalments, interest-free, is being extended to all property eligible for Business Relief or Agricultural Relief. This can help where the IHT bill cannot be met from liquid assets in the estate.
How to Claim Business Relief
As the executor of a will or administrator of an estate, you claim Business Relief when valuing the estate.
You should complete:
- form IHT400 (Inheritance Tax account)
- schedule IHT413 (Business or partnership interests and assets)
The market value of the business or asset at the date of death must be used.
A Worked Example
Consider an estate with shares in an unlisted trading company valued at £4 million on a death occurring on or after 6 April 2026, where all conditions for Business Relief are met.
- The first £2.5 million qualifies for 100% relief, removing £2.5 million from the IHT calculation.
- The remaining £1.5 million qualifies for 50% relief, reducing the chargeable value by a further £750,000.
- £750,000 of the share value remains chargeable to inheritance tax, before applying any nil-rate bands or other reliefs.
This worked example is for illustration only. Actual outcomes depend on the rest of the estate, available nil-rate bands, transferable allowances and the specific facts of the case. You should take professional advice before relying on any planning approach.
Common Pitfalls to Be Aware Of
A small number of issues come up regularly with Business Relief claims:
Investment activity. A business that has drifted from trading into mainly holding investments, residential lettings or property dealing may lose relief entirely. The “wholly or mainly” test looks at activity in the round.
Excess cash and excepted assets. Cash and assets held beyond the reasonable needs of the trade are generally excluded from the relief.
Lifetime gifts within seven years. If the donor dies within seven years of giving away business property, relief on death depends on the recipient still owning the original property at that date and on it still qualifying as relevant business property. Where the original asset has been sold and replaced with other qualifying business property, replacement rules can preserve the position.
Wills that do not reflect the new rules. Some wills include legacy clauses passing all relievable property to children, with the rest going to the surviving spouse. After 6 April 2026, this can waste the new £2.5 million allowance on the first death. Wills should be reviewed in light of the reforms.
Replacement property rules. Where qualifying property is sold and replaced, relief can usually continue, provided the replacement is itself relevant business property and the conditions are met.
Frequently Asked Questions
What is Business Property Relief?
Business Property Relief, also called Business Relief, is an inheritance tax relief that reduces the value of qualifying business assets by either 100% or 50% when calculating IHT on an estate or chargeable lifetime transfer.
What is the difference between Business Relief and Business Property Relief?
They are the same relief. HMRC’s current consumer guidance refers to it as Business Relief, while the underlying legislation in the Inheritance Tax Act 1984 and most professional advisers refer to it as Business Property Relief or BPR.
Which assets qualify for 100% Business Relief?
A business or an interest in a business, and shares in an unlisted company, can qualify for 100% relief if all conditions are met. From 6 April 2026, 100% relief is subject to the £2.5 million combined allowance covering Business Relief and Agricultural Relief.
How long do you need to own the asset?
You usually need to have owned the business or asset for at least two years before death or before making a lifetime gift. Some exceptions apply, including where the asset was inherited from a spouse or civil partner.
How does the £2.5 million allowance work?
For deaths on or after 6 April 2026, a £2.5 million allowance applies to the combined value of business and agricultural property in the estate that qualifies for 100% relief. Qualifying property above the allowance receives 50% relief. Any unused allowance can be transferred to a surviving spouse or civil partner.
Do AIM shares still qualify for Business Relief?
Qualifying AIM shares can still qualify for Business Relief, but at 50% rather than 100% for transfers and deaths on or after 6 April 2026. They do not use the £2.5 million 100% allowance.
Can inheritance tax on business property be paid in instalments?
Yes. From 6 April 2026, IHT on all property qualifying for Business Relief or Agricultural Relief can be paid by ten equal annual instalments, interest-free.
Where can I find the official HMRC guidance?
HMRC’s main guidance is on the Business Relief for Inheritance Tax page and the policy paper on the 2026 changes.
Summary
Business Property Relief remains a central planning tool for UK business owners, but the rules are changing. From 6 April 2026, 100% relief is capped through a new £2.5 million combined allowance for Business Relief and Agricultural Relief, qualifying assets above the allowance attract 50% relief, and shares on markets such as AIM move to 50% relief in all cases.
Reviewing your will, share structures and any planned lifetime gifts in light of the new rules is sensible. Because Business Relief depends on detailed conditions and the facts of each case, you should always take professional advice from a solicitor, chartered tax adviser or financial planner before acting.
This article is for general information only and does not constitute tax, legal or financial advice. The rules are based on HMRC guidance and legislation as published at the time of writing and may change. You should always seek advice from a suitably qualified professional based on your own circumstances.
Last reviewed: April 2026.
