Business Relief changes April 2026

28 April 2025

Business relief changes will take effect from 6 April 2026. These significant changes mean a reduction in Business Relief from 100% to 50% for business interests over £1 million.

These changes will have a big impact on family-owned and private businesses, leaving many at a loss for how to protect family ownership and ensure business continuity for future generations.

What is Business Relief?

Business Relief reduces the value of a business for Inheritance Tax (IHT) purposes and is available on the transfer of business assets during an individual’s lifetime or upon death. To qualify, assets must typically be owned for two years before the transfer.

Introduced in the 1970s, Business Relief aims to protect the legacy of privately owned businesses, allowing them to continue operating after an owner’s death, preventing the need to sell or break them up to cover Inheritance Tax liabilities.

Investors in qualifying businesses through share ownership can also benefit from Business Relief, as this reduces the amount subject to 40% Inheritance Tax if held for two years, compared to the seven-year rule for gifts. This allows individuals to maintain access to their investments and income while enjoying Inheritance Tax benefits.

Certain businesses, such as those primarily dealing in stock, securities, land, or investments, are excluded from this relief.

Business Relief pre-6 April 2026

Under the current rules, qualifying business owners can pass unquoted shares in a qualifying business to the next generation with 100% Business Relief from Inheritance Tax.

You may qualify for 100% Business Relief on:

Shares you own in a qualifying trading business, for example, your unquoted family company.
Shares you own in other trading companies, which might be investments. This includes companies listed on the Alternative Investment Market.
EIS and SEIS shares.

You may receive 50% Business Relief on:

Shares you own in a quoted company, if you have more than 50% of the voting rights
Your land, buildings or machinery if they are used wholly or mainly by a qualifying business

Business Relief exemptions:

Business Relief will not apply if your shares are in a business that deals in securities, stocks and shares, land or buildings, or making or holding investments, including shares are not exempt from business relief.
This particularly impacts you if you are a landlord with a rental property or have shares in a property rental company.

Business Relief changes from 6 April 2026

From April 2026, Business Relief will be reduced from 100% to 50% for business interests over £1 million.

With effect from 6 April 2026:

The 100% rate of relief will be capped at the first £1 million of business property and will be 50% thereafter.
The government will also reduce the rate of business property relief available from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.
Assets automatically receiving 50% relief, for example, quoted shares in a company giving the transferor control, will not use up the allowance and will continue to receive 50% relief.
Any unused allowance will not be transferable between spouses and civil partners.
There will be a combined £1 million allowance for trustees of relevant property trusts on the value of qualifying property to which 100% relief applies.
Settlors may have set up more than one trust comprising qualifying business property before 30 October 2024, in which case, from 6 April 2026, each trust would have a £1 million allowance for 100% relief.

For individuals, these changes could affect:

Property transferred on death.
Gifts made to individuals in lifetime.
Chargeable lifetime transfers, such as transfers into trusts, made in lifetime.

For trustees, these changes could affect:

Ten-year anniversary charges.
Exit charges.

How business owners can prepare for Business Relief changes ahead of 6 April 2026

Now faced with significant Inheritance Tax exposure, business owners should review their Wills, assets, business and personal succession plans.

There is an interplay between Inheritance Tax and other taxes, particularly Capital Gains Tax. Inheritance Tax planning should not be looked at in isolation.

Speak with our Inheritance Tax specialists

If you have any concerns regarding Business Relief changes or would like to discuss wider Inheritance Tax planning, please do not hesitate to get in touch.

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Business Relief planning FAQs

Does my business qualify for Business Relief?

Business Relief applies to trading businesses, unlisted company shares, and certain business property when active trading conditions and ownership tests are met. It’s important to review your business’s activities, asset mix, and share class structure to ensure qualification.

Can restructuring my business maximise Business Relief?

Restructuring can increase eligibility or value covered by Business Relief, but can create other tax charges and commercial risks. You might consider share reallocation, simplifying asset holdings or separating non-trading assets into a different vehicle as targeted options.

What is the market value of my shareholding, and should I apply discounts?

To understand the value of your shareholdings, it's important to seek advice. You can then consider minority, lack‑of‑marketability and control discounts where appropriate to establish a realistic market value for Inheritance Tax planning and funding needs.

Would I need to sell my business to pay Inheritance Tax, and who can buy it?

If your liquidity is insufficient and you cannot pay your Inheritance Tax bill, a forced business sale may be necessary. A strong succession plan and the right protections could help safeguard your business.

Should I accelerate my business succession plan?

Accelerating your business succession plan may protect your business from future Inheritance Tax, but changes may trigger Capital Gains Tax, Income Tax or an immediate Inheritance Tax charge depending on the transfer method. If you are considering this option is important to speak with a tax adviser to assess all options.

Should I take out insurance to cover potential Inheritance Tax liabilities or the seven‑year period?

Life assurance or buy‑sell insurance in an appropriate vehicle or Trust may provide liquidity to meet Inheritance Tax bills or secure funding during business ownership transitions. Again, advice should be taken here to determine the best policies and vehicles to meet your needs.

Could gifting business property to family members be an effective strategy, considering the £1 million allowance?

Gifting to use up individual allowances can be beneficial, but may result in a Capital Gains Tax issue, minority share value concerns, and loss of control.

Is selling the business in my lifetime preferable to succession from a tax perspective?

A lifetime sale can crystallise Capital Gains Tax and provide liquidity to settle Inheritance Tax, while preserving the ownership structure; however, it may increase future Inheritance Tax exposure.

Should I transfer qualifying assets into Trusts before April 2026?

Transferring qualifying assets into trusts may protect the value, but it could immediately trigger chargeable transfer consequences, ongoing trust taxes and potentially altered Business Relief treatment under transitional rules. With April 2026 fast approaching it is important to seek advice on how to manage our Business Relief exposure.

How can I prepare for Business Relief changes 2026?

Speak with a tax adviser to understand the total value of your assets and may any qualifying assets may be used against the new £1million allowance. A tax adviser can also run liquidity and tax models, review governance and business succession plans, including if an accelerated succession plan is possible.

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