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Business Relief (BR) has long formed part of the estate planning toolkit, offering inheritance tax (IHT) relief on certain qualifying business assets while allowing the owner to retain them.
It can also be accessed through investment services that invest in qualifying unquoted companies, providing another option for suitable clients who want to address a potential IHT liability without giving assets away.
The rules changed in April 2026, introducing a new £2.5m allowance for qualifying business and agricultural property that would otherwise receive 100% BR or Agricultural Property Relief (APR). Understanding what qualifying assets a client already owns, how much of this allowance may be available and the risks of any underlying investment has therefore become an important part of the BR conversation.
This guide covers how BR works, what changed in April 2026 and the key considerations when assessing a BR investment service.
Looking for the wider picture? Read our Guide to Estate Planning for an overview of the different options available when helping clients plan how their wealth is passed on.
What is Business Relief?
BR can reduce the IHT due on certain business assets when someone dies. Depending on the type of asset and, where relevant, the available 100% relief allowance, BR can provide relief at either 50% or 100%.
It can apply to assets such as a business or an interest in a business, as well as shares in qualifying companies. Clients do not need to own or run a business themselves to access BR. They can invest in qualifying unquoted companies, either directly or through a professionally managed BR investment service.
This means a client can remain the owner of their investment while potentially benefiting from BR. The asset must have been owned for at least two years and must still meet the qualifying conditions when BR is claimed.
What can qualify for Business Relief?
The amount of relief available depends on the type of asset. From 6 April 2026 a qualifying business or interest in a business, as well as shares in a qualifying unquoted company, can receive 100% BR, subject to the available £2.5m 100% relief allowance.
Other business assets can receive 50% BR. This includes certain assets that are owned personally but used by a qualifying business. Since April 2026, qualifying shares traded on markets such as AIM also receive 50% BR.
Not every business will qualify. For example, businesses that mainly deal in securities, stocks or shares, land or buildings, or that mainly make or hold investments will fall outside the rules.
Where a client invests through a BR investment service, the manager selects and manages companies that are expected to qualify for the relief. This does not guarantee BR, as the underlying companies must continue to meet the relevant conditions when the relief is eventually claimed.
What changed in April 2026?
From 6 April 2026, a new £2.5m allowance limits the amount of qualifying business and agricultural property that can receive 100% relief.
The allowance is shared across property that would otherwise qualify for 100% BR or APR. This can include shares in qualifying unquoted companies, including those held through a BR investment service.
Qualifying property within the available allowance can receive 100% relief. Any qualifying value above it can receive 50% relief. At the standard 40% rate of IHT, this results in an effective IHT rate of 20% on that excess value.
Any unused allowance can be transferred to a surviving spouse or civil partner. Where the first spouse or civil partner to die leaves their full allowance unused, the survivor could therefore have an allowance of up to £5m.
The reforms also changed the treatment of qualifying shares traded on markets such as AIM. These now receive 50% BR, regardless of the amount invested.
For advisers, this means it is important to understand what qualifying BR and APR assets a client already holds when considering a new BR investment, as those assets may already use some or all of the available £2.5m allowance.
Why is the two-year qualifying period important?
In most cases, qualifying business assets need to have been owned for at least two years before BR can apply.
This is an important distinction between BR and gifting. A gift made directly to another individual will need to be made seven years before death to fall fully outside the donor's estate for IHT purposes. With a qualifying BR investment, relief can become available after two years and the client remains the owner of the investment.
The two-year qualifying period can be particularly relevant where estate planning begins later in life or where a client is uncomfortable giving assets away permanently.
Reaching the two-year point does not guarantee BR. The investment must continue to meet the qualifying conditions when relief is claimed, and there are separate rules covering circumstances such as the sale and replacement of qualifying assets.
When might Business Relief be considered?
BR can be considered for clients with a potential IHT liability who want to take action during their lifetime but would prefer to retain ownership of their capital.
This could include clients who are unwilling to make substantial lifetime gifts, those beginning estate planning later in life or those who want to retain their investment because they may need the capital in the future.
Retaining ownership does not, however, mean that the money will always be readily accessible. BR investment services typically invest in unquoted companies, whose shares can be more difficult to sell. A withdrawal can be requested, but it may take time to realise the underlying investments and there is no guarantee that money can be returned when requested.
The investment therefore needs to be appropriate for the client in its own right, taking account of their objectives, capacity for loss, liquidity requirements and wider estate plan, rather than being considered solely for the potential tax relief.
How could Business Relief work in practice?
Let’s look at Sarah’s circumstances. She is 74, widowed and has an estate worth £1.2m, which she plans to leave to her children.
She has the full benefit of her own and her late husband's nil-rate band (NRB) and residence nil-rate band (RNRB). Assuming the relevant conditions are met, up to £1m of her estate could therefore pass free of IHT, leaving £200,000 potentially subject to tax.
At the standard IHT rate of 40%, this could result in an IHT liability of £80,000.
Sarah would like to address this potential liability, but she is reluctant to give £200,000 to her children now because she wants to retain ownership of the capital.
Following a review of her circumstances, her adviser could consider whether a BR investment is appropriate. If Sarah invested £200,000 in qualifying unquoted companies, held the shares for at least two years and the investment continued to qualify at the time of her death, it could receive 100% BR, assuming sufficient 100% relief allowance remained available.
On these assumptions, 100% BR could apply to the £200,000, potentially reducing the estate's IHT liability by £80,000.
Sarah would continue to own the investment, but her capital would be at risk and she could not rely on being able to access it when needed.
This example is for illustrative purposes only. It assumes Sarah has the full transferred NRB and RNRB available, that her residence qualifies for the RNRB and passes to direct descendants, that she has sufficient unused BR/APR 100% relief allowance available, that the £200,000 investment qualifies for 100% BR at the time of death, and that the investment is worth £200,000 at death. In practice its value could fall, and charges will apply, so the overall benefit could be lower. Tax treatment depends on individual circumstances and may change. Eligibility for BR is not guaranteed and capital is at risk.
How do BR investment services work?
A BR investment service gives clients access to a professionally managed portfolio of companies that are expected to qualify for relief, rather than requiring them to identify and manage individual investments themselves.
The investment approach can vary considerably between managers. Some services spread capital across a range of trading businesses, while others focus on particular sectors or investment strategies. Advisers should therefore understand where a client's money is being invested, how returns are expected to be generated and the risks associated with the underlying businesses.
The experience of the investment manager is another consideration, including how investments are selected and monitored, how the portfolio is managed over time and how the manager keeps the BR qualification of the underlying companies under review.
Liquidity also matters. Because many BR services invest in unquoted companies, advisers should understand how withdrawals are funded and what could happen if a client needs to access their money sooner than expected.
The return profile, diversification and charges should also form part of the assessment. Looking at these factors alongside the potential tax benefit can help advisers assess whether the investment itself is appropriate for the client.
What are the key risks?
BR investments involve a higher level of risk and will not be appropriate for every client.
- Capital is at risk. Investing in smaller, unquoted companies can carry greater risk than investing in larger companies listed on a main stock exchange. Investors may receive back less than they invested and could lose all of their investment.
- BR is not guaranteed. The availability of relief depends on the underlying companies continuing to meet the qualifying conditions, the client's individual circumstances and the tax rules in place when BR is claimed.
- Access to capital can be limited. Shares in unquoted companies can be difficult to sell. Withdrawals may therefore take significantly longer than expected and cannot be guaranteed when requested.
- Tax rules can change. Future changes to IHT or BR could affect the relief ultimately available to an investor.
Important Notice
For professional advisers only.
This document is for information purposes only and does not constitute investment, tax, financial or legal advice. It does not constitute an offer to buy or sell an investment or solicit any such invitation.
The explanation of the tax rules set out in this article has been written in accordance with our understanding of the law and interpretation of it at the time of publication. The information is believed to be accurate at the date of publication, but no representation or warranty, stated or implied, is made or given by any person as to its accuracy or completeness and no responsibility or liability is accepted for any such information or opinion. Tax treatment depends on individual circumstances, and tax rules may change.
Issued by Beringea LLP of Charter House, 55 Drury Lane, London, England WC2B 5SQ. Registered in England and Wales under number OC342919. Authorised and regulated by the Financial Conduct Authority under number 496358.
