What is business property relief?
Business property relief reduces the value of qualifying business assets for inheritance tax. From 6 April 2026, 100% relief applies only to the first £2.5 million of combined business and agricultural property, with relief on value above that limited to 50%.
The reform is the most significant change to private client planning in a generation. Value above the allowance is effectively taxed at 20% rather than being exempt. The allowance is transferable between spouses and civil partners, giving a couple up to £5 million, and it will be index-linked from April 2031.
Qualifying assets broadly include an interest in an unquoted trading business and unquoted shares, generally after two years of ownership. Businesses that are wholly or mainly investment — holding land, letting property, dealing in securities — do not qualify. Shares traded on but not listed on a recognised exchange, such as AIM, now attract 50% relief regardless of the allowance.
Trusts have their own allowance, refreshing every ten years. The option to pay inheritance tax in ten interest-free annual instalments has been extended to all assets qualifying for the relief.