Business Property Relief IHT
Business Property Relief (IHT)
Business Property Relief can protect the value of a qualifying family business from Inheritance Tax. But the rules changed on 6 April 2026, introducing a £2.5 million allowance for 100% relief and potentially significant tax liabilities above that amount.
Understand what qualifies, how much relief you could claim and how to plan the succession of your business.
What is Business Property Relief for Inheritance Tax?
Business Property Relief (BPR), officially called Business Relief, reduces the value of qualifying business assets when calculating UK Inheritance Tax (IHT). It can apply to a trading business, an interest in a partnership, shares in qualifying companies and certain assets used by a business.
For deaths from 6 April 2026, the combined value of qualifying business and agricultural property that can receive 100% relief is generally limited to £2.5 million per individual. Qualifying value above the available allowance normally receives 50% relief.
Unused 100% relief allowance from a deceased spouse or civil partner may be transferred, potentially increasing the survivor's allowance to £5 million.
Business Property Relief: what changed in April 2026?
The reform introduces a limit on the value of qualifying property that receives full relief. It does not mean that every business worth more than £2.5 million becomes fully taxable.
| Feature | Before 6 April 2026 | From 6 April 2026 |
|---|---|---|
| Qualifying trading businesses | Generally 100% relief without a value cap | 100% within available £2.5m allowance; 50% on excess |
| Business and Agricultural Relief | No combined monetary cap on 100% relief | One shared £2.5m allowance |
| Transfer of unused 100% allowance | Not applicable | Potentially transferable between spouses or civil partners |
| Qualifying AIM shares | Generally 100% relief | Generally 50% relief, outside the 100% allowance |
| Qualifying assets above allowance | Generally fully relieved if eligible at 100% | 50% of excess value remains relieved |
| IHT payment instalments | Subject to narrower eligibility rules | 10 interest-free annual instalments available for qualifying relief property |
The table compares assets that would otherwise qualify for 100% relief. Assets that qualify only for 50% relief retain their own rules. Transitional rules can affect gifts made from 30 October 2024.
Which businesses qualify for Business Property Relief?
Relief depends on the nature of the business, the asset owned and how long the owner has held it. A company being registered at Companies House does not automatically make its shares eligible.
Trading limited companies
Shares in a qualifying unquoted trading company, including many owner-managed family companies.
Sole traders
An interest in a genuine trading business may qualify, subject to ownership and activity requirements.
Partnership interests
Qualifying interests in trading partnerships may receive relief, including where family members operate the business together.
Business-use property
Personally owned land, buildings, machinery or plant used by a qualifying company or partnership can attract 50% relief where statutory conditions are met.
Qualifying AIM shares
From 6 April 2026, eligible shares traded on markets such as AIM generally attract 50%, rather than 100%, relief.
Mixed-activity businesses
Businesses combining trading and investment activities require careful analysis. The overall character of the business matters.
When is Business Property Relief unavailable?
A business consisting wholly or mainly of dealing in securities, stocks, shares, land or buildings, or making or holding investments, is generally excluded from Business Relief.
Property investment companies
A company mainly holding buy-to-let properties and collecting rental income will generally not qualify. A substantial property portfolio is not automatically a trading business for BPR.
Investment holding companies
Companies mainly holding investment assets, shares or passive investments generally fail the trading-business requirement.
Excepted assets
Surplus cash, investment portfolios or assets not required for current or future business purposes may be excluded even where the company itself qualifies.
Short ownership or binding sale arrangements
The normal two-year ownership condition and restrictions involving binding contracts for sale can prevent or limit relief.
The two-year ownership rule
Business property normally needs to have been owned for at least two years before the relevant transfer or death. However, special rules may apply to replacement property, inherited assets and certain transfers between spouses.
Establish the ownership period
Check acquisition dates, share transfers and any relevant replacement-property history.
Examine business activities
Review trading income, investment activity, assets, management time and the business as a whole.
Identify excluded value
Assess excepted assets, surplus cash and any relevant liabilities before determining the relievable amount.
Apply the available relief allowance
Consider earlier gifts, Agricultural Relief, spouse transfers and the rules applicable on the transfer date.
Business Property Relief Calculator – 2026/27
Estimate how much qualifying business value may be relieved and how much remains potentially exposed to Inheritance Tax.
Illustration based on full individual allowance.
This calculator assumes the amount entered is already the eligible business value after any excepted assets and relevant valuation adjustments. It assumes no competing Agricultural Relief claim, no earlier gifts consuming the allowance, and no other complications. The custom option allows you to model a reduced remaining allowance. It calculates Business Relief only, not the final IHT bill. Nil-rate bands, exemptions, liabilities, gifts, trusts and the rest of the estate may change the tax payable. It does not model relief apportionment across multiple assets.
Worked examples: how much IHT could be payable?
The following simplified examples assume a qualifying trading company, an unused £2.5 million allowance, no other qualifying agricultural assets and no prior transfers reducing the allowance.
Example 1: £2 million business
Value remaining after BPR
All £2 million qualifies for relief. There is no IHT attributable to this business value under these assumptions.
Example 2: £4 million business
Value remaining after BPR
Total relief is £3.25 million. At a hypothetical 40% IHT rate with no other available allowances, tax attributable to the remaining value would be £300,000.
Example 3: £6 million business
Value remaining after BPR
Total relief is £4.25 million. At a hypothetical 40% IHT rate with no other available allowances, tax attributable to the remaining value would be £700,000.
These are illustrative calculations, not complete estate tax computations. The actual IHT outcome depends on the wider estate, available bands, exemptions and reliefs.
How business owners can plan for Inheritance Tax
Good succession planning is about preserving business continuity as well as reducing unnecessary tax exposure. The right strategy depends on the ownership structure, future cash requirements and who will operate the business.
1. Review company valuations
Understand the commercial value of your business and how a change in profitability could affect future IHT exposure. Read our company valuations guide.
2. Examine surplus cash
Identify whether cash and investments are genuinely required for business purposes. Large cash balances are not automatically protected by BPR.
3. Consider lifetime gifts
Share transfers may be useful, but the seven-year rules, Capital Gains Tax, control and income requirements must be considered. Gifts from 30 October 2024 can interact with the new allowance.
4. Review wills and share agreements
Check succession provisions, cross-options, shareholder agreements and whether any binding sale obligations could affect relief.
5. Coordinate spouses' allowances
Unused relief allowance may be transferable on death. This should be considered alongside spouse exemption, ordinary nil-rate bands and the overall estate plan.
6. Consider liquidity
From April 2026, eligible relief property may benefit from 10 annual interest-free IHT instalments. This can reduce pressure to sell a business simply to fund tax.
Business Relief, Capital Gains Tax and other taxes
Inheritance Tax is only one part of a business succession decision. A lifetime transfer may have different tax consequences from an inheritance on death.
Capital Gains Tax
Gifting shares can trigger CGT based on market value, even where no cash changes hands. Hold-over relief may be available in qualifying circumstances. Explore our gifts and Capital Gains Tax guide.
Business Asset Disposal Relief
BADR concerns qualifying capital gains on disposals and is separate from inheritance tax Business Relief. See our Inheritance Tax guide for wider estate planning considerations.
Business Property Relief IHT FAQs
Is Business Property Relief still available in 2026?
Yes. From 6 April 2026, qualifying business and agricultural property can receive 100% relief within the available combined £2.5 million allowance, with 50% relief generally applying above that allowance. Some categories only qualify for 50% relief.
Is the BPR allowance £1 million or £2.5 million?
The final allowance introduced from 6 April 2026 is £2.5 million per individual. Earlier proposals referred to £1 million, so some older online articles are out of date.
Can a married couple receive £5 million of Business Relief?
Potentially. Any unused 100% relief allowance of a deceased spouse or civil partner can be transferred to the survivor, allowing up to £5 million in appropriate circumstances. This is separate from the ordinary IHT nil-rate band.
Do limited company shares qualify for BPR?
Shares in a qualifying unquoted trading company can qualify, normally subject to the two-year ownership rule. Investment companies and certain excepted assets may not qualify. The company's actual activities matter.
Does a buy-to-let company qualify?
Usually not. A company mainly holding residential property investments and collecting rental income will generally be regarded as an investment business, which is excluded from BPR.
Does Business Property Relief apply to AIM shares?
Qualifying shares traded on AIM generally receive 50% Business Relief from 6 April 2026, rather than the previous 100% rate. These shares do not use the £2.5 million 100% relief allowance.
Do I need to own a business for two years?
Normally yes. However, replacement-property rules and certain inherited or transferred interests may affect how the ownership requirement is met.
Can I gift my business to my children tax-free?
Not automatically. A gift may involve IHT, CGT and other considerations. If death occurs within seven years, relief may need to be reconsidered, including the recipient's ownership and use of the property and the transitional rules.
Can Business Relief and Agricultural Relief both apply?
Both reliefs may be relevant to an estate, but they share the £2.5 million 100% relief allowance. Where the same value qualifies for Agricultural Relief, that relief generally takes priority rather than giving two deductions on the same value.
How do executors claim Business Relief?
Personal representatives generally provide relevant business details on inheritance tax forms, including IHT413 where applicable. Additional calculations may be needed to apportion the 100% allowance and account for earlier transfers.
Can IHT on a family business be paid in instalments?
From 6 April 2026, IHT attributable to qualifying Business Relief property may be paid over 10 annual interest-free instalments, subject to the applicable conditions.
Plan ahead for the future of your business
Whether you own a family trading company, are considering transferring shares or need to understand the value of your business, getting the accounting and tax position clear is an important first step.
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About this guide
Prepared by The Online Accountants, a trading name of Parkinson (UK) Limited, to explain the UK Business Property Relief rules applicable from 6 April 2026. Last reviewed: 18 October 2026.
This guide provides general information, not individual inheritance tax, legal or investment advice. Eligibility and tax calculations depend on specific facts. Complex estates, trust arrangements and business succession structures should be reviewed with appropriately qualified tax and legal advisers.